Akbank (AKBNK TI) - Spreads on the rise; fees strong: Maintain Buy
Akbank's 2Q19 net income of TRY1,278m (-10% q-q, -20% y-y) was in-line with our estimate (TRY1,224m) but beat the RT consensus (TRY1,186m). Core revenue (NII + fees) went up 7% q-q on wider spreads and strong fee growth, despite lower CPI-linker revenue on revised in-house CPI assumptions. Swap related trading losses and declines in collection income were to blame for the q-q drop in earnings. The core spread widened by 42bp q-q on well-managed deposit costs (-53bp q-q) and almost stable loan yields. Fees grew by an eye-catching 34% y-y backed by payment systems and business loans vs a 23% increase in Opex. Net total CoR rose to 263bp from 224bp in 1Q, while NPL coverage climbed 1ppt to 59%. ROE slid to 10.5% from 12.4% in 1Q.
With this report we pull forward our forecast horizon to 2030 from 2023. Despite minor changes in 19-21E earnings, a prolonged forecast period leads to a higher long-term ROE and TP for Akbank. We maintain our BUY recommendation for the stock.
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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