TSKB (TSKB TI) - NPL coverage up; high ROE: Maintain Buy
TSKB reported 4Q19 net income of TRY171m (+14% q-q, +1% y-y), in line with both our forecast (TRY171m) and RT consensus (TRY171m). Core revenues was down 13% q-q due to lower securities yield owing to low October CPI, despite widened loan-to-borrowing spread (+14bp q-q, BNPPe: +50bp). Fees grew a huge 72% y-y on strong advisory fee generation, while operating expenses rose 23% y-y impacted by non-HR expenses. Trading losses continue to weigh on earnings but to a lesser extent q-q. NPL ratio rose to 3.5% (+28bp q-q) on some NPL inflows, while net total CoR climbed up to 180bp q-q from 106bp a quarter ago. TSKB guides for below 100bp net CoR in 2020 (19YE: 132bp). TSKB lifted its NPL coverage to 32% (+1.7ppt q-q) and released free provisions of TRY20m, which offset each other in terms of earnings impact. ROE rose to 12.9% in 4Q (3Q: 12.4%), which could be one of the highest ROE among peers.
We maintain BUY, on the back of strong long term (2019-30E) ROE at 14.7%.
Turkiye Sinai Kalkinma Bankasi is a private development and investment bank. Co. provides its clients with an array of products and services in the corporate banking, investment banking and advisory business lines. Co. serves its corporate clients in investment banking through solution oriented treasury products in addition to corporate finance activities such as mergers, public offerings and bond issuances. Co. mainly operates in investment and corporate banking segments. As of Dec 31 2014, Co. had total assets of TL6.23 billion.
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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