Akbank (AKBNK TI) - Lower provisions; strong fees: Maintain Buy
Akbank posted a 3Q19 net income of TRY1,397m (+9% q-q, +5% y-y), surpassing our estimate (TRY1,322m) as well as the RT consensus (TRY1,284m). Net earnings would have been 10% lower at TRY1,257m assuming flat NPL coverage q-q in 3Q19. Core revenue (NII + fees) grew 7% q-q on wider spreads and strong fee growth, despite lower CPI-linker revenue on revised in-house CPI assumptions. Core spread widened by 13bp q-q on lower deposit costs. Swap related trading losses continued to weigh on earnings. Fees grew by an eye-catching 29% y-y (BNPPe: 30%) supported by payment systems and business loans, vs a 20% y-y increase in Opex. Net total CoR rose to 279bp from 263bp in 2Q19, while NPL coverage dropped to 58% (-1.1ppt q-q). ROE rose to 11.1% (10.0% assuming flat NPL coverage) from 10.5% in 2Q19, which could be one of the highest among peers in 3Q19.
We have lowered FY19-21E EPS by an average 9%, mainly on changed NII and provision forecasts post the 3Q19 result. Maintain BUY with unchanged TP on strong long-term (through 2019-2030) ROE at 19%.
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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