Goldman Sachs said it was “cautious” on Turkish banks ahead into the May 14 election, with lenders more sensitive than other companies to a potential post-vote rate rise after years of unorthodox monetary policy.
President Tayyip Erdogan fears losing the historic election owing to a cost-of-living crisis that drove inflation to over 85% last year.
In a letter to clients, Goldman Sachs argued that Turkish banks had historically benefited from higher rates. Still, in November, the government imposed new laws forcing banks to lend at lower rates.
The Wall Street bank said lenders remained resilient despite authorities hiking the ceiling on FX-insured deposits earlier this year to relieve the lira’s strain.
“In our view, banks are most likely to take a hit in an opposition win scenario,” Goldman Sachs’ Jolene Zhong wrote.
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