Earnings Review / Halkbank (HALKB TI) - Weak results on low NIM & high CoR: Maintain Hold
Halkbank announced 3Q18 net income of TRY303m (-73% q-q, -61% y-y), below both the RT consensus (TRY407m) and our estimate (TRY372m). Core revenues fell 7% q-q on contracted core spread (-54bp q-q) and declined fees (4% q-q), despite higher CPI-linker revenues (+47% q-q). Fees contracted 7% y-y (vs 35% growth for top-tier peers), while opex rose 14% mainly on branch level expenses. Trading line remained in the red due to unfavourable FX transactions. Net provisions doubled this quarter on new inflows into Stage 2 & 3, which pushed the net total CoR to 134bp from 79bp a quarter ago. All-in-all, ROE fell 12pp q-q to 4.3%, the lowest reported ROE among top-tier peers.
We reduce our 18-20E EPS by 40%/46%/22%, on results, cut our GGM-based TP by 12% and maintain HOLD.
Turkiye Halk Bankasi (Halkbank) is a banking and financial services company based in Turkey. Co. offers corporate and commercial banking products and services to a range of customers, from individuals to large corporations. Co.'s operations include: consumer and retail banking, consumer loans, credit and debit cards, deposit and overdraft accounts, payroll services, corporate and commercial banking, budget loans, credit line facilities, cash management, investment banking, brokerage, factoring, leasing and insurance services, and tradesmen/SME banking. As of Dec 31 2011, Co. operates 771 branches and had total assets of TL92,160,657,000.
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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