Al Baraka Turk (ALBRK TI) - Backed by provisioning reversals: Maintain Hold
Albaraka announced a 1Q18 net income of TRY98m (+2% q-q, +173% y-y), above both the RT consensus (TRY59m) and our estimate (TRY72m). The deviation came mainly from lower-than-expected net provisions on strong provisioning reversals. Core revenues declined 28% q-q mainly on almost nil JV contributions in 1Q, while fee growth was low at 2% q-q. NIM dropped 1.7pp q-q to 3.1% on lack of JV revenues and contracted core spread. The trading line was supportive thanks to sale of securities, while opex slid 8.5% q-q. Asset quality deteriorated as NPL ratio rose to 5.6% (4Q17: 4.8%) with 59% coverage. ROE (annualized) materialized at 14% (4Q17: 16%). We think the results are operationally weak and expect a negative market reaction.
We revise our 18-20E EPS +0.4%/+0.5%/+2.6%, raise our GGM-based TP slightly to TRY1.72 and retain HOLD. Albaraka trades at 2018E P/BV of 0.4x and P/E of 4.2x, while 2018E ROE is at 11%.
Albaraka Turk Katilim Bankasi is a commercial bank based in Turkey. Co. supplies retail, corporate, and investment banking products and services within the framework of the principles of participation banking. Co. also operates as an insurance agency, a private pension insurance agency and as a brokerage agency. Co. through its branches, engages in purchase and sale of precious metals, provides intermediary services in quick money transfers, credit card and member business (P.O.S.) services. Co. maintains an extensive service network consisting of 166 national branches and alternative delivery channels. Co. also has a branch in the city of Erbil in Northern Iraq.
TEB Investment equity research analysts and strategist team consists of 8 analysts with an average finance sector experience of 15 years and special focus on international investors.
With our 6 equity research analysts we cover 93 companies across 21 sectors, reflecting 80% of the total market capitalization of all BIST companies and 86% of the BIST100 companies. Our strategy team provides in depth top-down and bottom-up market views with insight on FX and bond markets by publishing sectoral and strategic reports both in English and Turkish.
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