TURKISH BANKS - Banking monthly – July 2019
The banking sector posted TRY3.5b of net profit in July (-32% m-m, -14% m-m adjusted for dividends, cumulative -16% y-y). Higher opex on HR-related expenses is largely to blame for the m-m earnings drop in July. Core revenues (NII + fees) remained almost flat (+1% m-m) due to the contraction in core spreads on lower FX loan yields and CPI-linker revenues. TRY spread (+10bp m-m) increased on reduced deposit costs vs flat loan yields. Net CoR slid to 54bp from 101bp a month ago thanks to lower specific provisioning. ROE went further south to 9.2% from 13.6% last month.
We think July data is not indicative of 3Q19 banking sector profitability as it does not reflect the positive impact of the CBRT rate cut that came at the end of July. We expect loan growth, especially at the PBs, to pick up going forward, driven by consumer loans. CBRT’s new RRR regime also gives PBs incentives to push loan growth. If positive spread evolution is supported by volume growth, we believe banking stocks will continue to rally. We prefer banks which have room to grow, relatively higher CAR and well-managed asset quality. Garanti, Isbank and Akbank are our top picks among banks.
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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