Garanti Bank (GARAN TI) - Good set of results: Maintain Buy
Garanti posted 4Q19 net income of TRY1,222m (-6% q-q, +15% y-y), below our estimate (TRY1,330m), yet in line with RT consensus (TRY1,274m). Garanti set aside TRY150m free provisions this quarter; adjusted net income would have been 12% higher and in line with our estimates. Core revenue (NII + fees) rose 9% q-q, on widened core spread (+145bp vs BNPPe: 90bp), despite weaker linker revenues (-41% q-q) owing to low October CPI. Fees surged 23% y-y (BNPPe: 15%) led by payment systems and non-cash loans, while opex grew only 9%y-y. Swap costs continued to weigh on earnings, but at a lesser extent q-q. Net total CoR rose to 401bp from 323bp in 3Q19, while NPL coverage remained flat at 62%. ROE fell to 9.3% (10.4% excluding free provisions) from 10.2% in 3Q19.
We maintain BUY, on the back of strong long term (2019-30E) ROE at 19.6%.
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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