EUR 103.01 For Business Accounts Only

BGC Partners - AKBNK 4Q19 Update: Higher NPL generation offset by slight declines in coverage

Akbank reported TL1,330mn unconsolidated net income in 4Q19, broadly in line with the TL1,288mn consensus and BGC estimates. We observe that most of the P&L and balance sheet items were in line with our forecasts, apart from a stronger switch in volumes from FX to TL. However, we should note that Akbank’s net NPL generation at c.730bps in 4Q19 significantly outpaced our estimate due to what the bank described as a prudent classification of a large commercial file which added c.90bps to the NPL ratio. On the other hand, coverage levels dropped q/q (56% specific) which limited the increase in CoR. In summary, Akbank gained market share in TL volumes while losing in FX, accompanied by c.70bps q/q NIM expansion. Fee growth remained at a robust 26% y/y while cost growth normalized down to 12% y/y. As such, adj. ROEs were realised as 10% in 4Q19 and 11% in FY19, remaining slightly below the bank’s ≥12% 2019 guidance.