Isbank - Satisfactory But Slightly Missed Estimates

Isbank announced BRSA standalone financials on Friday. Net income came in at TRY1,245 mln, down by 24% Q-o-Q and 6% y-o-y, yielding a 12.9% ROE. Adjusting for one-off items and dividend income, the earnings growth stood at 41% y-o-y, although this was still down 20% Q-o-Q. Net income for 1H17 totaled TRY2,887 mln, for an annual growth rate of 26% (up 64% y-o-y on a recurring basis). The reported bottom line was slightly below our estimate of TRY1,264 mln and the market consensus of TRY1,293 mln. Higher than expected provisioning expenses and lower than expected "other" operating income are the main deviations from our estimate. The main positives of the quarter are strong asset quality (only 45 bps net NPL formation and 64 bps net total COR), 14% y-o-y growth in fee income and a sizable improvement in capital ratios (CET1 up 100 bps Q-o-Q to 14.0% and CAR up 160 bps Q-o-Q to 16.5%). On the flipside, we note a 45 bp Q-o-Q contraction in the swap adjusted NIM, 21% y-o-y opex growth and further deterioration in the lira LDR. Although the results are broadly satisfactory, we expect a slight negative reaction in the stock.