TSKB (TSKB TI) - Valuation appears stretched: Downgrading to Hold
TSKB has risen 12% in absolute terms and 6% relative to the main index (XU100) in the past two weeks. TSKB trades at a fair 2020E P/B of 0.5x and P/E of 3.6x, with an ROE of 14.6%. We think that unlike conventional banks, TSKB will not benefit from decreasing deposit costs over the coming quarters due to its investment bank operating model. We saw its margin contract in 3Q and expect further contraction in 4Q mainly on lower FX loan yields vs flat funding costs. Core revenues fell 5% q-q in 3Q on narrowing loan-to-borrowing spread (-92bp q-q, BNPPe: -38bp), despite low repo costs. NPL ratio rose to 3.2% (+1ppt q-q) largely on BRSA-stipulated NPL formation in 3Q, while NPL coverage was up by 30% (+4ppt q-q). ROE declined to 12.4% q-q in 3Q (2Q: 15.4%, private banks: 10.3%).
Our GGM-based TP of TRY1.08 implies a mere 6% upside. We downgrade to HOLD on limited upside.
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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