Earnings Review / Akbank (AKBNK TI) - Underpinned by deleveraging: Maintain Buy
Akbank’s 3Q18 net income of TRY1,327m (-17% q-q, -11% y-y) was in line with the RT consensus (TRY1,348m) and below our forecast (TRY1,431m). Core revenues grew on slightly expanded core spread (+9bp q-q) and higher fees. Akbank revised its CPI assumption to 17% from 11%, which supported the top-line (+TRY686m). Despite the CPI adjustment and core spread expansion, borrowing costs (+47bp q-q) weighed negatively on NIM. Opex went up on high inflation, yet fee growth was large enough to offset it. Net provisioning costs surged on currency impact, macro assumption update and new NPL inflows. While net total CoR rose to 443bp from 326bp in 2Q, it could have been worse had the bank not pulled down its provision coverage by 8pp down to 60%. ROE dropped 3pp q-q to 12.5%, but it could have been 8.5% with stable provision coverage.
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.
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