Garanti Bank (GARAN TI) - Good set of results in 2Q19: Maintain Buy
Garanti’s 2Q19 net income was TRY1,911m (+11% q-q, flat y-y), above our estimates (TRY1,751m) and RT’s (TRY1,684m). Lower-than-expected net provisions and better-than-expected spread evolution explain the deviation from our estimate. Core revenues (NII + fees) rose 3% q-q on widened core spread (+40bp vs BNPPe: 13bp) and almost flat fees, despite lower CPI-linker revenues on revised in-house CPI assumption (-1ppt). Fees grew by a huge 27% y-y backed by payment systems and money transfers, vs a 20% increase in opex. Swap-related trading losses appeared to be the main headache of the quarter; yet they were fully offset by lower net provisions (-57% q-q). Net total CoR dropped to 190bp from 268bp in 1Q, while NPL coverage fell 1ppt to 58% (TRY1,779m net income at flat NPL coverage). ROE rose to 15.5% (Akbank: 10.5%) from 14.5% in 1Q, which could be the highest ROE among peers in 2Q.
We revised our FY19-21E earnings and maintain BUY.
Turkiye Garanti Bankasi is a private banking group based in Turkey. Co. operates as an integrated financial services group in every segment of the sector including corporate, commercial, SME, payment systems, retail, private and investment banking together with subsidiaries in pension and life insurance, leasing, factoring, brokerage, and asset management. Co. provides a range of financial services to 13 million customers through a distribution network of 994 domestic branches; 6 foreign branches in Cyprus, Luxembourg and Malta; 3 international representative offices in London, Dusseldorf and Shanghai with more than 4,152 ATMs, a Call Center and internet.
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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