Halkbank (HALKB TI) - Top-line grows; NPL coverage down: Maintain Hold
Halkbank’s 3Q19 net income was in line with our estimate and the RT consensus (TRY316m). Core revenue expanded 18% q-q on a wider core spread and lower repo costs. Trading losses on swap costs and an elevated effective tax rate post tax reversals in 1H19 put pressure on earnings. Fees grew by a sector topping 49% y-y yet almost matching our 52% estimate while Opex was inflated by provisions for bonus payments to employees. Net provisioning expenses surged y-y largely on BRSA stipulated NPL formation, while net total CoR touched 78bp (2Q: 67bp). NPL coverage fell to 57% (-7ppt q-q, peers 61%). Reported ROE fell 10bp q-q to 4.1% in 3Q (peers: 9.6%). If we adjust ROE for lower coverage and higher effective tax, it would be in the red (peers: 7.7%) and quarterly net loss would be at TRY584m.
We cut our 2019-21E EPS by 39%/27%/34%, post 3Q results. Our GGM based TP (TRY6.24) remains unchanged. We 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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