EUR 8.55 For Business Accounts Only

TURKEY MARKET OUTLOOK - 2Q19: Banks to fare better than non-banks

In 2Q19, we expect banks’ net income growth (20% y-y)  to be better than that of non-banks (14% y-y).

We expect core banking revenue to be resilient – set to grow 7% q-q on widening core spreads. While we expect net earnings to rise 20% y-y, it will fall 19% q-q on higher swap costs, seasonally weak collections and lack of meaningful provisioning reversals. We see state banks outperforming private banks in terms of TRY spreads. TRY L/D spreads should inch up q-q for state banks while that of private banks should dip. We expect operating expenses to fall y-y. We expect loan loss provisions to fall on lack of loan growth, muted new NPL inflows and limited currency depreciation. We expect net total cost of risk of banks of our coverage universe to level out at 205bp.

Among top-tier banks in our coverage universe, we expect GARAN to post highest y-y operating revenue growth followed by VAKBN; YKBNK will post highest y-y rise in net earnings. We expect non-financials OTKAR, PGSUS & TKFEN and consumer names BIZIM, ARCLK and ULKER to top in terms of EBITDA growth; TTRAK, KRDMD and AKCNS are set to post worst EBITDA erosion in our coverage.