Turkey Banks Rise Most in a Week on Bet Reserves to Pay Interest

Turkish lenders climbed the most in a week after the central bank said it may consider paying interest on a portion of their required reserves.

The Borsa Istanbul’s 16-member banks index rose 3 percent at 3:18 p.m. in Istanbul, heading for the biggest gain since March 18. Turkiye Garanti Bankasi AS (GARAN) rose 2.9 percent, leading index gains. Akbank TAS (AKBNK) advanced 2.6 percent, while state-run Turkiye Halk Bankasi AS (HALKB) climbed 3.6 percent.

The central bank’s monetary policy committee considered interest payments for the lira portion of required reserves that lenders keep at the central bank, according to minutes of the committee’s March 18 meeting published today. Such payments would be “measured and limited,” according to the minutes.

“Banks have been oversold to the degree that the shares are spiking up with the smallest positive news,” Sevgi Onur, an analyst at Global Securities in Istanbul, said by phone. “Policy makers are emphasizing a measured step -- one shouldn’t expect too much from this.”

With the lira portion of required reserves at 10.1 billion liras ($4.5 billion) as of March 21, the market may be “overreacting,” Ibrahim Aksoy, chief economist at Gedik Investment in Istanbul, said by phone.

Turkish banks shares have been hit since the government was shaken by graft allegations that were made public with a Dec. 17 police operation. The central bank’s unscheduled Jan. 29 midnight meeting, at which it raised the benchmark one-week repo rate by 550 basis points to 10 percent, exacerbated the sell-off.

The banks index has declined 5.3 percent this year, compared with a 0.3 percent gain on the MSCI Europe/Banks Index.

“Even if the central bank takes a limited step, it would be positive for bank financials,” Metin Esendal, vice president of research at Oyak Securities in Istanbul, said in an e-mail. “Reserves earn nothing for the time being.”

To contact the reporters on this story: Taylan Bilgic in Istanbul at tbilgic2@bloomberg.net; Isobel Finkel in Istanbul at ifinkel1@bloomberg.net

To contact the editors responsible for this story: Samuel Potter at spotter33@bloomberg.net Benjamin Harvey

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