Earnings Review / Al Baraka Turk (ALBRK TI) - Backed by trading gains: Maintain Hold
Albaraka announced a 3Q18 net income of TRY176m (+79% q-q, 3Q17: TRY10m), above RT consensus (TRY135m) and our estimate (TRY145m). Core revenues showed 38% q-q growth on core spread widening (124bp) and higher securities yields. FX spreads inflated 2.4pp q-q on currency impact, which was behind the core spread improvement. Fee and opex went up in tandem with each other at 22% y-y. The trading line, on the other hand, supported earnings thanks to securities sell-offs and FX gains on tier-1 sub-debt. The NPL ratio rose to 6.5% (2Q: 5.9%) with 60% coverage. Net total CoR surged to 189bp from 73bp a quarter ago. ROE rose to 20.7% from 12.2% in 2Q, the highest ROE in our coverage universe. Yet, we believe it is unsustainable going forward on a likely drop in trading gains and less supportive spreads.
We raise our FY18-20E EPS 34%/18%/22% and our GGM-based TP slightly on lower long-term ROE to TRY1.44 and retain HOLD.
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.
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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