Garanti Bank (GARAN TI) - Strong top-line; trading losses hurt: Maintain Buy
Garanti announced a 4Q18 net income of TRY1,062m (-37% q-q,-38% y-y), essentially in line with our estimate (TRY1,114m) and RT consensus (TRY1,058m). Core revenues expanded 26% q-q thanks to 7pp upward CPI-adjustment and strong fee growth (35% y-y), despite contracted core spread (-2.2bp q-q). Trading line was unsupportive on FX losses from fully hedged provisions and elevated swap costs. Opex expanded 27% y-y on amortization of IT investments and currency impact. Net provisioning costs declined on TRY appreciation, despite some new NPL inflows. Net total CoR slid to 311bp from 439bp in 3Q, while NPL coverage remained flat q-q at 59%. ROE slid 5.7pp q-q to 9.1% (Akbank 9.7%). However, without free provisions (TRY390m) ROE could have been 12.5%, which could be the highest ROE among private peers. 18YE ROE stood at 15.1% (Akbank 13.5%), but would rise to 17% adjusted for free provisions (TRY1.1b).
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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