Akbank (AKBNK TI) - Strong spreads and high ROE: Maintain Buy
Akbank has announced a 1Q18 net income of TRY1,709m (+12% q-q, +17% y-y), above both our forecast (TRY1,561m) and the RT consensus (TRY1,587m). Our deviation stems predominantly from provisions and other banking income, accounted using IFRS 9, and lower trading losses. Core revenues (+1% q-q) appear broadly in line on q-q lower CPI-linker revenues post 4Q’s CPI adjustment (TRY325m), expanded core spread (+50bps q-q) and slightly higher fees. TRY LTD spread widened an eye-catching 77bps q-q (vs. BNPPe: +45bps) on upward loan re-pricing. Opex remains muted. Provisioning costs dropped under the influence of this quarter’s huge NPL sale (TRY774m), the total CoR however when adjusted for this sale is up by 50bps to 143bps. All-in-all, ROE climbed 1.4pp q-q to a high 16.8%, which is likely to be the best among peers.
We reiterate our BUY call on Akbank. We revise our 18-20E EPS 0.4%/0.6%/2.9%, raise our GGM-based TP by 2% to TRY11.53. Akbank trades at 2018E P/BV of 0.9x and P/E of 5.7x, while 2018E ROE is at 16% and the 2017-19E EPS CAGR at 14%.
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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