Akbank (AKBNK TI) - Backed by lower effective tax rate: Maintain Hold
While Akbank’s 4Q18 net income of TRY1,051m (-21% q-q, -31% y-y) is above RT consensus’s (TRY971m) and our (TRY950m) forecasts, the pretax profit is actually 3% lower than our expectation. The lower effective tax rate is related to transactions of foreign subsidiaries. Elevated swap costs and contracted spread led to the quarterly weakness in earnings. Core revenue growth of 7% q-q is way lower than Garanti’s 26%. The 1.2ppt q-q decline in core spread evolution was weaker than our -70bp expectation. Fees rose 35% y-y (Garanti in line), opex grew 19% y-y, below inflation. Net provisioning costs was due to lower general provisions, despite some new NPL inflows. Net total CoR slid to 291bp from 443bp in 3Q, while NPL coverage dropped by 1.8ppt to 58%. ROE declined 2.8ppt q-q to 9.7% in 4Q, yet adjusted for free provisions (TRY100m) and lower NPL coverage, it would be 9.4% (Garanti 12.5%).
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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