Akbank T.A.S (OTCQX:AKBTY), one of Turkey’s biggest private sector banks, has performed quite well year to date despite a broader sell-off in Emerging Markets (including Turkey) after investors started factoring in higher rates in the US and the election of Donald Trump. The bank’s shares are up by over 20% YTD on the Borsa Istanbul but down slightly in the US, largely as a result of the drop in the Lira. Despite the rise in the share price, the stock continues to trade well below its historical valuation multiples, such as its 5-year average p/e ratio and price to book value.
The bank further has a Return on Equity well above that of its peers and has managed to maintain its level of non-performing loans well below the national average through its more conservative lending policies and strict risk management. If the bank can maintain this leading position and continue to provide reasonable earnings growth, a fair value of about $5.70 (for the ADR) is in play. Investors should, however, note that the bank is significantly impacted by economic conditions within Turkey and may be negatively affected by any further deterioration in the economic conditions within the country.
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