Turkish lenders held the top five spots in a ranking of European banks' total shareholder returns for 2022, reflecting a year of remarkable share price growth against a backdrop of rampant inflation in the country.

Türkiye Is Bankasi A.S., or İşbank, delivered the largest total return among a sample of major European banks at 308.62%, S&P Global Market Intelligence data shows. It was followed by Yapi ve Kredi Bankasi AŞ at 257.63% and Türkiye Vakiflar Bankasi Türk Anonim Ortakligi at 223.10%, while Türkiye Halk Bankasi AS and Akbank TAS also had total returns nearing 200%.

Turkish banks have benefitted from large influxes into the country's equity markets as savers seek to navigate rampant inflation, which hit a two-decade high of 85.51% in October. The number of investors in Turkey's stock market rose to 3.8 million in December 2022 from 2.4 million at the end of 2021, the Financial Times reported, citing data from Turkey's Central Securities Depositary.

Bank profitability has also surged, with net income in the Turkish banking sector for the year through November rising to 389.0 billion lira from 75.32 billion lira in the year-ago period, according to the latest data from the country's banking regulator.

İşbank's return on equity for 2022 is forecast at 42.5%, according to S&P Capital IQ mean consensus estimates, more than double the 18.4% result in 2021. Fee income rose 103.5% year over year in the third quarter and for the full year could be more than 80% above the bank's guidance, Deputy Chief Executive Gamze Yalcin said on an earnings call in November.

* Access economic and demographic data for Turkey. * View a transcript of Isbank's latest earnings call. * Read last year's edition of this story.

The next nearest challenger to the Turkish banks was Spain's CaixaBank SA with a 59.63% total return. CaixaBank in October raised its guidance for full year 2022 net interest income, and CFO Javier Pano said "very significant growth" is expected in 2023.

Spanish banks are among the biggest beneficiaries of rising central bank rates as they hold a larger proportion of variable-rate loans than many of their European rivals. Banco de Sabadell SA and Bankinter SA also performed strongly.

At the other end of the spectrum, Banca Monte dei Paschi di Siena SpA and Credit Suisse Group AG had the weakest returns at negative 89.83% and negative 67.15%, respectively. Credit Suisse suffered major client outflows after a torrid year, while uncertainty remains around the future of Italian state-owned Monte dei Paschi.

Banks with significant exposure to Russia — notably Raiffeisen Bank International AG and OTP Bank Nyrt. — fared poorly amid the country's invasion of Ukraine and subsequent imposition of sanctions. Polish banks PKO Bank Polski SA and Bank Polska Kasa Opieki SA, which face headwinds from Swiss franc-denominated mortgages and new government policies, recorded negative returns, as did several major French banks, which stand to benefit less from rising rates and are struggling to mitigate rising costs.

On an aggregate basis, European banks fared better than their U.S. peers but lagged Asian lenders. The S&P Europe BMI Banks index fell 3.2% for the year, compared to a 3.0% rise in the equivalent Asia banks index and a 19.2% fall in the S&P 500 Bank index.

As of Jan. 3, US$1 was equivalent to 18.73 Turkish lira.