Investors have shown a keenness in refreshing their views on Turkish banks after several years of disengagement, Bank of America (BofA) has noted in a report.

“The intensity of recent interactions reminds us of the pre-2013 period – years of heavy positioning, single-digit rates, and anticipation of an investment grade,” the investment bank said.

This time around the triggers are said to be low positioning and the “normalization” outlook for inflation, rates and banks’ real returns, it added, saying that recent interactions were dominated by long-only investors, unlike in prior years.

Most investors highlight the fact that they haven’t done work on Turkey for some time, but they were following it closely now, BofA observed.

It said: “The common view is banks would offer the best exposure to Turkey’s ‘normalization’ theme. Almost all meetings are dominated by questions on inflation expectations, the currency outlook and the sustainability of orthodox policies.”

Hedge funds were highlighting how they have “trading ideas” not only for the banking sector in Turkey but also for other sectors, but the country’s short ban and high offshore Turkish lira (TRY) funding costs were preventing them from executing these trades, BofA said.

Turkish banks have long been a “trading universe” with the focus largely on the outlook for the next quarter, according to the report.

“The key change for us, in this cycle, is questions have shifted to the mid-term outlook. This bodes well given current prospects, as the banks’ fundamental story is likely to take off post 1Q24, after the rates peak [in the central bank’s ongoing monetary tightening cycle],” the report concluded.