TSKB (TSKB TI) - NPL coverage up; trading line drags: Maintain Buy
TSKB’s 3Q19 net income missed our forecast on higher trading losses on cross currency swap valuations due to declining rates, but met the RT consensus. Core revenues were down 5% q-q on a tighter loan-to-borrowing spread, despite lower repo costs. Fees grew 45% y-y (private banks: 30% y-y) on strong advisory fee generation while opex rose 27% y-y on non-HR expenses. NPL ratio rose to 3.2% largely on BRSA’s stipulations. Net total CoR touched 106bp from 81bp in 2Q19, while NPL coverage inched up to 30%. Net income would have been 26% higher at TRY190m assuming flat NPL coverage q-q. ROE declined to 12.4% in 3Q. Coverage-adjusted ROE would be 15.7% (private banks: 10.5%), which, we think, could potentially be the highest adjusted ROE in our banks coverage for 3Q.
We revise our 2019/20/21E net earnings by -8.4%/-4.4%/+4.5%. Our GGM based TP remains unchanged given minimal changes to our 12-month forward BV as well as on unchanged ROAE, COE and long term growth rate assumptions. Maintain BUY.
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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