Akbank (AKBNK TI) - Spreads widen; CoR up: Maintain Buy
Akbank posted a 4Q19 net income of TRY1,330m (-5% q-q, +27% y-y), in line with our estimate (TRY1,328m) and RT consensus (TRY1,288m). 4Q net earnings would be 21% lower at TRY1,045m assuming flat q-q NPL coverage. Core revenue (NII + fees) grew 14% q-q on wider spreads and strong fee income growth, despite weaker CPI-linker revenue owing to low October CPI. Core spread widened by 1.1ppt q-q (BNPPe: 68bp) on lower deposit costs. Swap related trading losses continued to weigh on earnings, yet at a lesser extent q-q. Fee income grew by an eye-catching 26% y-y (BNPPe: 17%) supported by payment systems and business loans, vs a 10% y-y increase in Opex. Net total CoR rose to 448bp from 286bp in 3Q19, while NPL coverage dropped to 56% (-1.9ppt q-q), mainly due to NPL sales and write-offs. Adjusted for these, NPL coverage would be 61%, according to our calculations. ROE declined to 10% in 4Q19 (7.9% assuming flat q-q NPL coverage, Garanti: 9.3%) from 11.1% in 3Q19.
We maintain BUY, on the back of strong long term (2019-30E) ROE at 18.2%.
Akbank is a commercial bank. Co. operates in five segments: Retail banking offers a range of retail services, such as deposit accounts, loans, credit cards, insurance products and asset management services; Corporate and Small and Medium Size Enterprises banking provides financial solutions and banking services; Treasury Activities conducts regional and foreign currency spot and forward transactions, bonds and other domestic securities; Private banking offers banking and investment transactions for upper-income groups and the International banking provides services for foreign trade financing and Turkish Lira clearances, and money transfers through agent financial institutions.
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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