EUR 8.54 For Business Accounts Only

TURKISH BANKS - Weekly banking review

In the week ended 8 March, loans and deposits inched up 0.4% w-w. TRY loans grew 0.2% w-w vs 0.7% decline in FX loans. We see nil w-w loan growth for private banks; state banks led the sector in loan growth (up 0.8% w-w). In y-y terms, state banks’ TRY loan growth was 14.8% vs 8.4% fall for private banks. LDR stood at 115% (TRY: 140%, FX: 92%). NPL ratio is stable at 4.1%, but NPL volume rose 1.0% w-w; 11.3% w-w hike in participation banks’ NPLs is attractive. XBANK has gained 1.4% this week and continues to outperform EM banks. YTD, XBANK has gained 12.8%, outperforming EM and European banks by 6.4% and 4.3%, respectively. In Turkish lira terms, banks have gained 16.5% YTD, outperforming the broad market/manufacturers by 3.9%/0.9%. This outperformance is a result of inflows into three XBANK members: VAKBN (+35.6%) / YKBNK (+35.0%) / ISCTR (+34.4%).

GARAN (+14.1%)/AKBNK (+11.6%), accounting for 62.5% weight of XBANK, continued to underperform index YTD. HALKB (+2.1%) was the worst performer. At 4.4x 2019E P/E and 0.5x P/B, our coverage Turkish banks are trading at a discount of 47% to EM peers on P/E and 49% on P/B. We recommend further exposure to Isbank, Garanti and VakifBank.