Turkey undertook a series of robust economic policies that have been drawing foreign investors to the country’s debt markets, after President Recep Tayyip Erdogan was re-elected in 2023. As the nation has been aggressively utilising the capital markets over the past 24 months, GCC (Gulf) banks have been instrumental in attracting the proper kind of investors.
Due to recent rate reductions, indications of declining inflation, strong corporate sell-side participation, and the wider Middle East’s faith in Turkey’s leadership, investors have been placing large wagers in the nation’s bond market.
Between June 2023 and January 2024, Turkey issued 64 bonds and sukuk from corporations, financial institutions, and the government. Volumes increased by 89% to $33 and 6 billion in 2024.
HSBC priced 21 deals at that time, but Emirates NBD Capital, the investment banking division of Emirates NBD, the biggest lender in Dubai, priced four deals in January 2025 and 26 deals in Turkey in 2024.
“Last year was super busy for us in Turkey. We priced 26 deals in Turkey last year. In 2021 we did two deals. The years 2021, 2022 and 2023 to some extent were very quiet because of orthodox policies and geopolitics. But now we are seeing a significant jump in volumes,” Ritesh Agarwal, Head, Debt Capital Market at Emirates NBD Capital, said.
Turkey’s annual volumes, which were mostly made up of sovereign funding, averaged $13 billion between 2015 and 2022. Over the past 18 months, bond yields in Turkey have increased significantly. At the moment, its bond yields are rising by 250 basis points. Around 500 bps was its peak in October 2023.
The renewed interest from investors is not just a yield story. To put it in perspective, Khaled Darwish, MD, Head of Debt Capital Market, CEEMEA Region at HSBC, said, “Since the country’s presidential election, the Turkish bond market has been strong; macro risk has significantly decreased in Turkey. The government’s policies to address inflation, the fiscal deficit, the current account deficit, and other issues have garnered significant investor confidence. The international market now has more faith in the government and its bonds as a result of everything mentioned above.”
Why are GCC banks active in Turkey?
Numerous GCC banks maintain subsidiaries in Turkey and aim to expand their loan and asset portfolios in the Turkish market.
The banks were able to take part in syndicated loans in the country, according to Darwish, and their operations were not concentrated on the bond and sukuk markets. Emirates NBD’s subsidiary DenizBank has a significant presence in Turkey.
“Now it’s become a full bank and we can showcase our strength across product suites. We used to primarily work on FI transactions, but now we are adding it up with corporates. We do a lot of loans as well. We are very active on the loans as well in Turkey,” Ritesh Agarwal said.
Qatar National Bank has a presence in Turkey through QNB Finansbank, and Kuwait Finance House has a subsidiary that operates in Turkey. Middle Eastern investors currently make up 15–25% of the Turkish bond market. It was 1-2% before. Next, which makes up 40–50%, are the United Kingdom and the larger European region.
“Middle Eastern investors have become very active players in the Turkish bond market in the last two years. We have spent a lot of time with regional investors over the last few years to educate them on the Turkey story, including reverse roadshows in Turkey, and the effort is paying dividends now,” Ritesh Agarwal added.
To diversify funding sources, the government has actively promoted Islamic finance by encouraging the issuance of sukuk and other Shariah-compliant securities.
Abdeslam Alaoui, MD, Head of CEEMEA Capital Markets at Deutsche Bank, said, “This is reflected by Turkey’s DCM being one of the third largest among the core Islamic jurisdictions, with a 15% share after Indonesia (24%) and Malaysia (20%) at end-3Q24, and it is one of the three G20 countries active in the sukuk market.”
In what seems to be another boost for Turkey’s banking sector, UAE’s biggest Islamic bank, the Dubai Islamic Bank raised its stake in TOM Group, from 20% to 25%, in January 2025. The move followed the initial stake acquisition in September 2023, further cementing DIB’s presence in that country’s “dynamic financial landscape.”
“Turkey continues to be a pivotal market for DIB, given its sizeable population, rapidly expanding digital infrastructure, and impressive economic growth trajectory. The move aligns with DIB’s vision to drive financial inclusion and bring innovative Sharia-compliant financial services to underbanked and non-banked segments,” said a statement from the UAE-based venture.
“The increased shareholding not only solidifies DIB’s position as a key stakeholder in Turkey’s thriving digital banking sector but also underscores our deep-rooted belief in the country’s strategic intent around tech-based economic development. The partnership with T.O.M. Group goes beyond our financial growth aspirations. It reflects the larger objective of building a comprehensive, future-proof and tech-rich global Islamic financial model with built-in intelligence to evolve with the fast-changing customer mindsets of today,” said Dr. Adnan Chilwan, Group CEO at DIB, during the occasion.
Debut corporate issuances
Despite anticipated fiscal consolidation, sovereign financing is still anticipated to be the primary source of DCM issuance in Turkey. Experts assert that banks and corporations, however, have enormous potential to expand their market presence.
“While government funding makes up most of the supply, we have seen a major increase in corporate and FI issuers accessing markets. In 2024, FI supply increased 298% YoY and corporate supply increased by 332% YoY. The share of supply has greatly changed in 2024 versus 2023, where we started seeing more of a balance between the makeup of government supply from Turkey vs Corp/FI,” Alaoui said.
HSBC’s Darwish noted that the corporate sector is bringing a larger share of debut issuers compared to the banking sector, where HSBC already has the majority of banks as existing issuers.
“On the corporate side, we had at least four-five new debuts last year and will continue to get more debuts this year, including from new sectors that previously relied on bank lending,” Darwish concluded.
This shift towards a more diverse mix of issuers indicates that Turkey is moving towards financial stability, where corporate and financial institutions are increasingly tapping into the capital markets. As a result, there is greater opportunity for investors seeking new avenues for growth.
The continued success of Turkey’s bond and sukuk markets will depend on the country’s economic steadiness, the government’s commitment to fiscal reforms, and the ongoing global demand for Sharia-compliant securities. With a strong track record and a supportive environment, Turkey remains an attractive destination for international investment.