Banks' profitability divergence: Q1 2026 profit growth slowed

Profitability in the banking sector continued into the first quarter of 2026, but the pace of profit growth moderated and bank-level dispersion became more apparent.

Analyst previews for the quarter point to strong year-on-year profit gains for the sector but only modest quarter-on-quarter expansion. Research notes and brokerage forecasts single out certain banks—such as Yapı Kredi, Garanti and Akbank—for stronger quarterly performance, while others face headwinds from high base effects, rising operating expenses and lower indexed security income. Although geopolitical tensions stemming from the Iran conflict began to affect costs from late February, their direct impact on first-quarter profits is assessed as limited.

Market reaction has been mixed: banking indices and individual bank equities remain sensitive to earnings detail and to shifts in funding costs, producing episodic volatility. Some analysts expect net interest income recovery to support earnings, while weaker fee income and lower trading gains could cap overall profit expansion.

In the broader economic context, a downtrend in inflation and expectations of further policy easing by the Central Bank of the Republic of Turkey (TCMB) provide a supportive backdrop for banking margins over time. At the same time, ongoing Middle East tensions and energy price swings pose upside risks to costs and funding conditions, potentially weighing on second-quarter outlooks and investor sentiment.

Strategically, analysts say investors should watch balance-sheet specifics in upcoming results: credit-deposit spreads, provisioning trends and valuation of indexed securities will drive differentiation across banks. While Q1 results are expected to be broadly constructive, the outlook is conditional on how geopolitical developments and funding dynamics evolve in the coming quarters.