TURKISH BANKS - Weekly banking review
Weekly banking review
In the week to 7th September, total loans decreased 1.1% w-w, while total deposits contracted 1.1% w-w. The annual run rate of TRY loan growth declined to 13.8% from 14.3% a week ago. The LDR remained flat w-w at 116%, while the NPL ratio is at 2.9% with 71% coverage.
The Turkish banking index (XBANK) gained 8.8% this week and outperformed its EM peers. The quarter-to-date XBANK sell-off now stands at 44.5% compared to EM banks which are down 3.5%. XBANK has gained 1% in lira terms but underperformed the market by 0.8%.
The Central Bank of Turkey (CBRT) raised the weekly repo rate by 625bp yesterday. All else being equal, this rate hike (475bp net rate over the blended average CBRT funding rate of 19.25%) on 2019E bank earnings ranges from 0% to 30%, which corresponds to 0-5% of their 2019E book values, post-tax. AKBNK is the least impacted followed by GARAN, as they carry the lowest amount of TRY money market funding, while state banks are impacted most.
On a 2019E P/E of 2.8x and P/B of 0.4x, Turkish banks we cover are trading at 64% and 60% discounts to EM peers, respectively. We have BUYs on Akbank, Garanti, Vakifbank and TSKB.
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.
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