Garanti Bank (GARAN TI) - Well-managed asset quality; high ROE: Maintain Buy
Garanti posted 1Q19 net income of TRY1,722m, above the RT cons (TRY1,568m) and our estimate (TRY1,601m). Our deviation mainly came from lower-than-expected trading losses on favourable FX transactions. Core revenues registered 23% q-q decline on lower CPI-linker revenues (down TRY2.5b), despite widened core spread (136bp vs BNPPe: 123bp) and strong fee growth (9% q-q). Despite weak top-line, retreated trading losses and lower net provisions on high collections supported 1Q earnings. Net total CoR slid to 268bp from 303bp in 4Q, while NPL coverage stayed flat q-q at 59%. ROE rose to 14.5% in 1Q (Akbank: 13.2%) from 9.1% in 4Q. Garanti set aside free provision (TRY100m), yet any adjustment to ROE is not necessary as this is offset by reversal of provisions set aside last year for potential impairment of OTAS loan.
We maintain our GGM-based TP of TRY12.14 and BUY rating.
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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