S&P expects modest recovery in Turkish banks’ profitability

LONDON

S&P Global Ratings expects Turkish banks to post a modest improvement in profitability in 2026, supported by expanding net interest margins.

In a new report S&P Global Ratings stated that “the pace of margin recovery, and therefore near-term earnings growth for banks, will be driven by the magnitude and timing of future policy rate cuts.”

The ratings agency noted that banks with a higher proportion of funding in Turkish Liras — particularly those using money market instruments with quicker repricing dynamics than deposits and those with greater reliance on demand deposits — are positioned to benefit more rapidly and to a greater extent from the recovery in margins.

The report also emphasized that banks are likely to maintain adequate capital levels. However, S&P warned that “persisting economic imbalances continue to pressure banks’ asset quality.” On a more positive note, the agency highlighted that external debt rollover rates have increased and that dollarization of deposits is expected to stabilize at current levels.

S&P cautioned that the future direction of monetary policy, domestic political developments and global geopolitical factors remain key risks to its forecast.

The report specifically pointed to potential escalations along Türkiye’s borders with Syria and Iran, as well as possible disruptions to trade stemming from recently announced U.S. sanctions on countries doing business with Iran.