Morgan Stanley downgrades Turk banks

Bloomberg

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Turkish banks will experience "a marked deterioration in earnings expectations," Morgan Stanley said in an e-mailed report Friday. It cut İşbank to "underweight" from "equal weight" and Garanti Bankası to "equal weight" from "overweight."

"The risk to Turkish banks’ earnings are still substantial," analyst Magdalena Stoklosa said in the report. "A combination of weak growth and weakening domestic spending and investment is likely to depress earnings in 2009 and 2010."

Morgan Stanley lowered its price estimate for İşbank to 3.5 Turkish Liras from 3.9 liras and for Garanti to 2.6 liras from 3.2 liras. Akbank, the biggest Turkish bank by market value, had its estimate cut to 4.3 liras from 5.2 liras.

Earnings at the three banks may contract by an average of 32 percent this year and by 22 percent in 2010 as economic output this year declines by 3.5 percent, Morgan Stanley said. Non-performing loans will probably rise to between 7 percent and 8 percent of total loans, it said.