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BGC Partners - GARAN 4Q19 Update: Strong revenues offset by higher provisions

Garanti Bank reported TL1,222mn unconsolidated net income in 4Q19, slightly higher than TL1,274mn consensus and TL1,231mn BGC estimates, when adjusted for the TL150mn free provisions set aside in 4Q. We assess that earnings were slightly stronger than expected, thanks to higher-than-forecast NIM expansion and fee income, offset by slightly higher CoR and much higher effective tax rate (29% in 4Q), while the remaining P&L items were all broadly in line with our forecasts. In summary, Garanti gained market share in both loans and deposits, accompanied by some 70bps q/q NIM expansion, with lower funding costs being partially offset by lower CPI-linker yields. Meanwhile, the bank continued with NPL clean-up, leading to 390bps net CoR. Fee growth remained at a robust 23% y/y while adj. cost growth normalized down to 12% y/y. As such, adj. ROEs were realised as 10% in 4Q19 and 13% in FY19, indicating that bank met its 2019 guidance.