Teb Yatirim - Albaraka Turk Katilim Bankasi AS (ALBRK) Al Baraka Turk (ALBRK TI) - Weak top-line; low ROE: Downgrading to Reduce

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Teb Yatirim

Ovunc Gursoy

EUR 8.96 For Business Accounts Only

Al Baraka Turk (ALBRK TI) - Weak top-line; low ROE: Downgrading to Reduce

Albaraka has announced 4Q18 net loss of TRY238m (3Q18: TRY176m, 4Q17: TRY96m) vs our TRY279m net loss expectation. Core revenue clocked a 44% q-q decline on core spread contraction (2.3ppt q-q), despite strong fee generation (+78% y-y), the second best growth after Vakifbank. TRY spread widened 1.6ppt on higher loan yields, while FX spread contracted 6ppt q-q. Opex increased 89% y-y, the highest increase among our coverage banks. NPL ratio rose to 7.2% (3Q: 6.5%) with sector low coverage of 47% (-13ppt q-q). Net total CoR fell to 133bp from 189bp a quarter ago. Adjusted for the drop in NPL coverage, the net total CoR would be 479bp. Albaraka ended the year with ROE of 4.7%, the lowest ROE in our coverage universe.

We revise 2019-20E EPS +10%/-38%, and cut our GGM-based TP to TRY1.40 (from TRY1.44). We downgrade our rating on the stock to REDUCE from Hold.

07/03/2019 10 EN

Underlying

Albaraka Turk Katilim Bankasi AS

Albaraka Turk Katilim Bankasi is a commercial bank based in Turkey. Co. supplies retail, corporate, and investment banking products and services within the framework of the principles of participation banking. Co. also operates as an insurance agency, a private pension insurance agency and as a brokerage agency. Co. through its branches, engages in purchase and sale of precious metals, provides intermediary services in quick money transfers, credit card and member business (P.O.S.) services. Co. maintains an extensive service network consisting of 166 national branches and alternative delivery channels. Co. also has a branch in the city of Erbil in Northern Iraq.

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TREALBK00011 Istanbul Stock Exchange Turkey

Provider

Teb Yatirim

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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Analysts

Ovunc Gursoy

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Al Baraka Turk (ALBRK TI) - Weak top-line; low ROE: Downgrading to Reduce

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