Turkish bank shares fell to the lowest level in almost five years relative to book value amid a corruption probe that has claimed a lender’s top executive and 10 government ministers.
Lenders in Turkey’s 16-company XBANK Index declined to 1.03 times book value in Istanbul trading, the lowest since early 2009, and may fall below book by the end of the year, data compiled by Bloomberg show. The index has plunged 17 percent since Dec. 16 to the lowest since June 2012.
“The last time this happened was the beginning of 2009, right after the Lehman collapse,” said Isik Okte, chief strategist at Halk Yatirim Menkul Degerler, in an e-mail from Istanbul. “This should be seen as ‘panic’ levels for long-term investors, but, unfortunately, everybody is looking at their TV screens for news developments instead.”
The corruption investigation, which came to light on Dec. 17, has implicated a banking official as well as government ministers. The lira weakened past 2.17 to the dollar and 3 to the euro for the first time today. Halkbank’s chief executive officer, Suleyman Aslan, remains in prison after $4.5 million in cash was found in his house last week, according to news reports. The shares of the bank are down 28 percent since Dec. 16 to 11.35 liras. Aslan said the funds were donations he’d gathered to help build Islamic schools, Hurriyet newspaper reported, citing his court testimony.
Last week, Sam Vecht, head of BlackRock Inc.’s emerging markets team in London, said the U.S.-based money manager has been buying Turkish financials since the crisis began. “We have been adding to positions in Turkey, especially in the financial sector, over the last few days, as valuations are now compelling,” he said.
Ten of the 16 listed Turkish banks were trading at less than their book values as of 4:50 p.m. today in Istanbul, including state-run Turkiye Vakiflar Bankasi AS, at 0.75 times, and Yapi ve Kredi Bankasi AS, which is part-owned by UniCredit SpA, at 0.83 times.
The cheapest bank is terms of price to book ratio was Islamic lender Asya Katilim Bankasi AS, which traded at 0.49 times book value. Halkbank’s ratio was 1.1 times its book value.