Turkey Wake up call: Macro, Political and Equity News, 15th May

This analysis by GLOBAL Securities is presented to you by Raiffeisen Centrobank AG. Raiffeisen Centrobank AG acts solely as a distributor of this analysis and has not introduced any material changes to the content of this analysis or any recommendation included herein.

Wake – up call

BIST slipped 0.96% yesterday amid continued selling pressure on banks and the risk-off mood in global markets. After an indecisive open and some wobble during the morning session, index turned south after 12:30PM and retreated some 1,800 points to 98.5k in the next two hours. Rest of the saw a cautious rebound that carried the benchmark to a close above the 99k mark. Banking index was down 2.29% for the day as heavyweights AKBNK and GARAN came under pressure. PGSUS, TUPRS, EREGL, PETKM, ALKIM, MAVI, BIZIM, and Sisecam stocks topped the decliners among non-financials while BIMAS, KRDMD, ASELS, GUBRF, TTRAK, and ENJSA managed to buck the market slide. Today, our local macro agenda is busy, starting with the residential sales data for April’20 at 10AM local time. Home sales had inched up 3.4% yoy in March to 108.7k units thanks to the 90.4% jump in mortgage-backed transactions while the coronavirus restrictions weighed on the activity especially in the second half of the month. This will be followed by April'20 central government budget numbers at 11AM, and CBT's monthly expectations survey to be revealed at 2:30PM. We foresee a positive open for the BIST given the nice turnaround in American markets overnight (1.6-1.8% gains after we left) and further gains in lira (USDTRY at 6.9125 vs 6.9627 at yesterday's closing bell). U.S. futures are almost unchanged in early trades while Asian indices are mostly trading in the green.
Macro and Political News:
(=/-) Number of deaths from coronavirus reached 4007... According to the Health Ministry, the number of deaths from coronavirus increased by 55 people yesterday and reached 4007. The total numbers of tested and infected people are 1.5mn and 144,749 in Turkey.

(=/-) Industrial production index contracted by 2% in March... According to Turkstat, the industrial production index contracted by 2% YoY and 7.1% MoM in March 2020. When looking at sub-sectors, the mining and quarrying index decreased by 5.6%, manufacturing index decreased by 1.9% and electricity, gas, steam and air conditioning supply index decreased by 0.9% YoY in March 2020. In 1Q20, calendar adjusted industrial production increased by 4.4% YoY.

(=/-) Retail sales volume decreased by 0.2% YoY in March... According to Turkstat, Retail sales volume decreased by 0.2% YoY in March 2020 year. In March, non-food (except automotive fuel) sales decreased by 8.7%, automotive fuel sales decreased by 3.2%, while food, drinks and tobacco sales increased by 17.0%.

(=/+) Total turnover increased by 5.2% on annual basis... Turkstat released the total turnover for March 2020. Total turnover index, including industry, construction, trade, and services sectors increased by 5.2% YoY in March 2020. Looking at the details of the total turnover index, industry increased by 5.2%, trade increased by 11.5%, construction decreased by 21.4% and services decreased by 2.2% YoY in March 2020.

Sector and Company News:

(=) CMB approval for capital increase on VAKBN… According to the bank’s announcement on Wednesday, the Capital Markets Board (CMB) approved the capital increase with the method of private placement by selling shares to Turkish Sovereign Wealth Fund (TVF) amounting TRY7.0bn. The share price will be determined according to the Wholesale Transactions Procedure of Borsa Istanbul (BIST) and will be not lower than the nominal value of the shares as indicated by CMB in its decision.

(=) SAHOL will release its 1Q20 earnings today. The consensus estimate is TRY1.0bn vs. Global estimate is TRY1.20bn.

(+) HALKB posted TRY825.0mn net income in 1Q20, 2% below the consensus estimates vs. 10% below the Global estimates which was TRY923.0mn. The main reasons behind the deviation are i) the significant increase in trading loss segment that we expected TRY700mn net loss for Q1 and the result came as TRY1.27bn; ii) provisions for expected credit loss segment was estimated up by around 50% YoY to TRY1.50bn in Q1, however the bank decided to increase the provisions by 213% to TRY2.33bn. The net income indicates 3.51% increase QoQ and 170% increase YoY.

HALKB generated a solid NIM which was 5.2% sourced from declining deposit costs that indicates 120 bps of improvement QoQ.

In terms of liquidity structure, the bank is slightly above the other banks’ LDR which came 104% due to the significant loan expansion in Q1, approximately 13% above the sector average.

As for asset quality, the bank managed to improve its NPL ratio by 30 bps QoQ to 4.80%, below the sector average. On the other hand, prudential stance of the bank by increasing NPL coverages by 5 ppt in Q1 led the CoR levels up by 98 bps to 241 bps.

Regarding the solvency metrics, the bank posted 13.90% CAR, slightly above the domestic and international regulations and below the Turkish banking sector average of 18%. And to remind, HALKB officially announced for the capital increase last week; according to the bank management’s statement, TRY7.0bn amount of capital increase operation will result in next week. This capital injection is expected to increase the bank’s CAR above 15%.


TRYmn 1Q20 Actual Consensus Estimate Dev. from consensus Global Est Dev. From Global Est 1Q19 YoY 4Q19 QoQ
Net Income 825 845 -2.37% 923 -10.62% 305 170.49% 797 3.51%
NIM (Non-adjusted) 5.20% 2.10% 3.10% 4.00% 1.20%
Loan Growth 12.90% 8.60% 4.30% 0.80% 12.10%
Securities Growth 6.80% 12.50% -5.70% 6.60% 0.20%
Deposit Growth 9.90% 8.40% 1.50% 5.00% 4.90%
LDR 104% 103.20% 1.00% 102% 2.30%
ROE 10.20% 4.30% 5.90% 10.10% 0.10%
ROA 0.70% 0.30% 0.40% 0.70% 0.00%
C/I 35.50% 62.7% -27.20% 50.20% -14.70%
NPL Ratio 4.80% 3.10% 1.70% 5.10% -0.30%
CoR 2.41% 1.06% 1.35% 1.43% 0.98%
Tier 1 Ratio 11.10% 10.00% 1.10% 11.70% -0.60%
CAR 13.90% 13.00% 0.90% 14.30% -0.40%
Net Interest Income 5,288 1,728 206.02% 3,797 39.27%
Fee Income 721 616 17.05% 729 -1.10%
Fee Growth -1.00% 9.40% -10.40% 2.16% -3.16%


(+) BIMAS posted TL430mn net profit in 1Q20, higher than consensus of TL376mn net income and our estimate of TL360mn, mainly due to stronger than expected operational performance. Revenues grew by 40% YoY to TL12,598mn higher than the consensus expectation of TL11,753mn and our estimate of TL11,573mn. Strong revenue growth was mainly driven by the 25% YoY LfL revenue growth and new store openings. Excess demand in the last two weeks of March following COVID 19 pandemic was also supportive for the revenue growth. TL985mn EBITDA in 1Q20 is also higher than consensus of TL899mn and our estimate of TL862mn. BIMAS’ EBITDA margin of 7.8% was above consensus estimate of 7.6% and our estimate of 7.4%. The reason behind the higher than expected EBITDA margin is mainly attributable to favourable product mix coupled by the decline in OpEx/Net Sales ratio due to economies of scale.

In 1Q20 while LfL basket size grew by 24% YoY and we see slight, 0.5%, improvement in LfL daily average customer traffic despite of the service hours limitation because of Covid-19 pandemic. As a result, LfL daily average sales per store increased by 25% YoY. File, which is in the ramp-up period yet, also showed a strong operational growth and booked net profit in 1Q20. Note that File reached to break-even in terms of EBITDA in 2019. On the other hand, the management announced that online platform of File is in the planning process, yet, while there is not an online-platform plan for Bim for a now. Bim’s slight recovery in its Morocco operations also continued in 1Q20 although weak outlook in Egypt operations still continues.

On the B/S side, the Company maintained its solid balance sheet outlook thanks to its strong cash generation derived by operational growth and supportive net working capital. As a result, BIMAS increased its net cash (exc. financial investments) by 125% and 330% YoY to TL2.6bn. Strong ROE generation in 1Q20 continued with 31%.

Following its 1Q20 results, BIMAS has not shared its updated its 2020E guidance. However, the management stated that there is not an update in their CapEx and new store openings plan after its 1Q20 results. Recall that BIMAS guided +23% revenue growth, 7.5% EBITDA margin and TL 1bn of CapEx, indicating around 850 new store openings for FY20.

We maintain our positive view on BIMAS as the Company maintains its solid organic growth with around +800 store openings per year. We consider that there is a large room for modern retailers to grow in Turkey retail market, in which traditional retailers still have a significant portion of total retail market


TRYmn 1Q20 Consensus Global Securities Dev. from consensus 1Q19 YoY 4Q19 QoQ
Revenue 12.598 11.753 11.573 7% 9.025 40% 10.529 20%
EBITDA 985 899 862 10% 654 51% 803 23%
margin 7,8% 7,6% 7,4% 0,2 pps 7,2% 0,6 pps 7,6% 0,2 pps
Net profit 430 376 360 14% 215 100% 319 35%
margin 3,4% 3,2% 3,1% 0,2 pps 2,4% 1 pps 3,0% 0,4 pps
Net Debt/EBITDA (x) 0,52 1,3 -74 bps 0,8 -31 bps
EV/EBITDA 10,0 11,9 9,8
P/E 22,9 18,8 23,1
ROE (%) 31% 33% -2 pps 29% 2 pps
Net debt 1.804 2.733 -34% 2.615 -31%
Working capital -2.554 -1.239 106% -1.758 45%
Δ in WC -797 19 -4203% -200 298%
CapEx 269 277 -3% 290 -7%
FCF to firm 1.389 294 372% 619 124%
Shareholders' Equity 4.679 3.741 25% 4.237 10%


Store Openings 1Q19 4Q19 1Q20 YoY Δ QoQ Δ
BIM Turkey 6.885 7.438 7.716 831 278
File 71 93 98 27 5
BIM Morocco 456 497 506 50 9
BIM Egypt 301 320 320 19 0
Total 7.713 8.348 8.640 927 292



LfL store outlook (YoY %) 1Q19 2Q19 3Q19 4Q19 1Q20
Customer Traffic 0,6% 1,2% -0,2% -0,5% 0,7%
Basket Size 17,9% 18,9% 14,3% 5,9% 23,9%



(-) PETKM posted TL13mn net loss in 1Q20, compared to our estimate of TL40mn net loss and the consensus net loss of TL7mn. PETKM’s revenues of TL2.8bn was down by 2% YoY and also 2% below the consensus and 10% lower than our estimate. Also PETKM’s EBITDA margin of 5.6% was below our estimate of 6.9% and the consensus of 7.7%. PETKM’s net debt improved by 20% QoQ to TL5.4bn with 3.85x indebtedness ratio which was 2.93x a quarter ago. The deterioration in net debt was mainly due to the increasing working capital requirements QoQ.


TRYmn 1Q20 Consensus Global Securities Dev. from consensus 1Q19 YoY 4Q19 QoQ
Revenue 2,766 2,812 3,085 -2% 2,832 -2% 2,795 -1%
EBITDA 155 217 213 -29% 288 -46% 312 -50%
margin 5.6% 7.7% 6.9% -2.1 pps 10.2% -4.6 pps 11.2% -5.6 pps
Net profit -13 -7 -40 87% 154 -109% 104 -113%
margin -0.5% -0.2% -1.3% -0.2 pps 5.4% -5.9 pps 3.7% -4.2 pps



(-) The highest outflow from GDDOs since the beginning of the year, from the equites outflow continued with the average… According to the CBRT data released on Thursday, during the week of 01-08 May, non-residents executed net outflow of USD228mn from equities and USD822mn from GDDOs. As of last week, non-residents’ y-t-d net total flow of securities has been USD-3.18bn from equities and USD-6.28bn from GDDOs.


Exhibit: Non-residents’ y-t-d net flow of securities (Weekly)



Source: CBRT weekly securities statistics

(-) CBRT international reserves… According to the latest CBRT data released on Thursday, the Central Bank’s gross international reserves declined by 48 bps WoW from USD86.40bn to USD85.99bn. The decline in gross reserves has been 3.46% by monthly comparison. Net international reserves declined by 7% from USD27.91bn to USD26.0bn WoW.

As of May 8, the CBRT gross international reserves declined by 18.54% and the net reserves declined by 36.5% y-t-d.


Exhibit : The change in gross and net international reserves of CBRT

CBRT International Reserves (USD,mn) 08/05/2020 30/04/2020 10/04/2020 10/05/2019 03/01/2020 w/w m/m y/y y-t-d
Net Reserves 26,023 27,961 26,300 26,664 40,985 -6.93% -1.05% -2.40% -36.51%
Gross Reserves 85,986 86,398 89,071 93,788 105,561 -0.48% -3.46% -8.32% -18.54%

Source: CBRT analytical balance sheet


Exhibit : The graph for gross and net international reserves of CBRT beginning from Jan-19




Source: CBRT analytical balance sheet


(=) BRSA weekly banking data… According to the weekly banking data released by BRSA on Thursday, total loans increased by 1.54% WoW mainly driven by the commercial and SME loans. On the consumer loans side, while mortgage loans remained flattish, GPLs inched up by 147 bps WoW. FX indexed loans continued its declining trend weekly, and the YoY period the overall contraction has been by 62% which gives the Turkish banking sector a buffer foreign currency liquidity.

NPL ratio for the sector declined by 7 bps WoW and has been 4.81% however it is still higher than the May19 NPL ratio level which was 4.22%.

Total deposits inched up by 88 bps WoW mainly driven by the increase in commercial institutions deposits, by 2.34%. On the other hand, official institutions deposits declined substantially by 8.24% WoW.

As for the total FX deposits of residents, while the real persons declined their FX deposits by USD983.0mn WoW, the corporates added USD632.0mn to their FX deposits. This caused an 18 bps of small decline in overall FX deposits of the residents.


(TL, mn) 08/05/2020 30/04/2020 10/04/2020 10/05/2019 03/01/2020 w/w m/m y/y y-t-d
Total Loans 3,152,014 3,104,092 2,938,404 2,587,580 2,646,894 1.54% 7.27% 21.81% 19.08%
Consumer Loans 532,022 527,505 510,349 404,324 467,381 0.86% 4.25% 31.58% 13.83%
Housing 210,857 210,898 211,493 183,848 199,268 -0.02% -0.30% 14.69% 5.82%
Vehicle 7,009 6,999 7,050 6,202 7,051 0.14% -0.58% 13.01% -0.60%
GPL 314,156 309,608 291,806 214,275 261,062 1.47% 7.66% 46.61% 20.34%
Consumer Credit Cards 103,411 106,034 109,541 104,020 116,791 -2.47% -5.60% -0.59% -11.46%
Commercial and Other Loans 2,516,581 2,470,553 2,318,514 2,079,236 2,062,722 1.86% 8.54% 21.03% 22.00%
Installment Commercial Loans and Corporate Credit Cards 556,894 542,210 481,591 426,025 434,411 2.71% 15.64% 30.72% 28.20%
SME Loans 775,595 749,954 679,382 636,252 611,735 3.42% 14.16% 21.90% 26.79%
Fx Indexed Loans 9,309 9,375 9,846 24,248 11,808 -0.70% -5.45% -61.61% -21.17%

(TL, mn) 08/05/2020 30/04/2020 10/04/2020 10/05/2019 03/01/2020 w/w m/m y/y y-t-d
Non Performing Loans 151,497 151,527 151,549 109,246 150,758 -0.02% -0.03% 38.67% 0.49%
Consumer Loans 13,182 13,211 13,318 12,756 13,355 -0.21% -1.02% 3.34% -1.29%
Housing 1,151 1,156 1,173 1,137 1,269 -0.40% -1.89% 1.23% -9.27%
Vehicle 173 172 174 232 201 0.44% -0.22% -25.32% -13.80%
GPL 11,858 11,882 11,971 11,387 11,885 -0.20% -0.95% 4.14% -0.23%
Consumer Credit Cards 6,251 6,265 6,305 6,678 6,323 -0.22% -0.85% -6.38% -1.13%
Commercial and Other Loans 132,063 132,051 131,926 89,812 131,081 0.01% 0.10% 47.04% 0.75%
NPL Ratio 4.81% 4.88% 5.16% 4.22% 5.70% -1.54% -6.81% 13.84% -15.61%

(TL, mn) 08/05/2020 30/04/2020 10/04/2020 10/05/2019 03/01/2020 w/w m/m y/y y-t-d
Total Deposits 3,012,913 2,986,708 2,859,315 2,317,658 2,567,331 0.88% 5.37% 30.00% 17.36%
Natural Person 1,808,254 1,789,452 1,738,591 1,427,066 1,595,204 1.05% 4.01% 26.71% 13.36%
Demand 508,152 488,077 453,437 286,210 360,147 4.11% 12.07% 77.55% 41.10%
Time 1,300,102 1,301,374 1,285,154 1,140,856 1,235,056 -0.10% 1.16% 13.96% 5.27%
Commercial Institutions 1,026,156 1,002,722 928,941 751,818 817,594 2.34% 10.47% 36.49% 25.51%
Demand 349,925 335,499 280,706 188,222 220,838 4.30% 24.66% 85.91% 58.45%
Time 676,231 667,223 648,235 563,595 596,757 1.35% 4.32% 19.99% 13.32%
Official and Other Institutions 178,503 194,534 191,783 138,775 154,533 -8.24% -6.92% 28.63% 15.51%
Demand 37,323 50,873 42,463 30,584 33,914 -26.63% -12.10% 22.03% 10.05%
Time 141,179 143,661 149,320 108,190 120,619 -1.73% -5.45% 30.49% 17.05%
Deposits Subject to Insurance 784,973 769,031 750,116 536,607 698,978 2.07% 4.65% 46.28% 12.30%


(USD, mn) 08/05/2020 30/04/2020 10/04/2020 10/05/2019 03/01/2020 w/w m/m y/y y-t-d
Total FX Deposits of Residents 194,278 194,629 195,084 181,223 194,377 -0.18% -0.41% 7.20% -0.05%
Real Persons 117,603 118,586 118,764 109,640 121,166 -0.83% -0.98% 7.26% -2.94%
Corporates 76,675 76,043 76,320 71,582 73,211 0.83% 0.47% 7.11% 4.73%