Banking shares soars 25 pct in a month

ISTANBUL - Hürriyet

Investors in banking assets traded at Borsa Istanbul have earned almost 25 percent over a month with the help of heightened optimism, after the Central Bank hinted that it may pay interest for required reserves.

The banking index, which has been on an upward trend due to the good mood fueled by hopes that the March 30 local election results will lead to political stability, accelerated the gains it had already seen after the release of Central Bank minutes on March 25.

The Central Bank said it may pay limited interest on banks’ required reserve lira deposits and, if needed, boost liquidity in the financial system to help counter any economic slowdown.

It stopped paying interest on lira reserve requirements in 2010, after loosening global liquidity flooded Turkey with cheap funding while it sought to cool an overheating economy.

Closing February at 106,746 points, the Turkish bank index soared over 19 percent in March on hopes of interest rate payments that would boost earnings in the sector, which has seen profits wane in recent quarters as the Central Bank seeks to cool consumer borrowing.

On April 1, the index extended its gains to 25 percent, ranking the best-performing Borsa Istanbul index by a landslide over the past month.

The recent upsurge also marked a strong recovery from the downward trend the index experienced since last year’s May.

After hitting its all-time high point of 200,307 in May 2013, the index plummeted to its historical lowest point of 103,477 in February, causing a 48 percent loses for its investors.