TURKISH BANKS - Earnings momentum to soften in 1Q18E
We forecast 8% y-y growth in aggregate net earnings for our coverage in 2018E followed by a 15% y-y growth in 2019. Turkish banks trade at a 42% discount to EM banks on our 18E P/E of 5.0x and a 40% discount on P/BV of 0.7x. On our estimates, Turkish banks deliver a long-term ROE of 15.4%, 1ppt higher than the benchmark bond yield. We see 15% absolute return potential over the next 12 months for our banking coverage.
Swap-adjusted NIMs should fall in 1Q18We foresee net earnings for our coverage increasing a mere 4% q-q, but flat if adjusted for dividends. ROEs should rise to 14.0% (+22bp q-q). We estimate core revenues for our coverage universe should slide 2% q-q on likely drop in CPI-linker revenues post last quarter’s one-off adjustments, while L/D spread is forecast expanding on upward re-pricing of loans, and a slight growth in fees. Widened spreads should largely offset the impact of lower CPI-linker revenues on NIM in 1Q; however, the swap-adjusted NIM is expected to ebb 35bp q-q.
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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