Earnings Review / Isbank (ISCTR TI) - High Opex and CoR offsets solid NII: Maintain Hold
Isbank announced 2Q18 net income of TRY1,528m (-15% q-q, +8% y-y), in line with our estimate (TRY1,488m), yet above the RT consensus (TRY1,437m). Core revenues grew 14% q-q on expanded core spread (+64bp) on upward loan repricing and soared CPI-linker revenues (27% q-q). Fees soared 30% y-y, while opex grew 14% y-y in 2Q18. Trading line remained in the red on mounted swap losses (+39% q-q) as Isbank preferred to use swaps extensively rather than involving in deposit competition in 2Q. Asset quality deteriorated as two big ticket loans went into NPL. Net total CoR jumped to 180bp in 2Q from 68bp in 1Q. Isbank set aside TRY150m free provisions this quarter, otherwise earnings would be 10% higher. The CAR dropped to 15.9% (-0.60bp q-q) mainly on currency depreciation. All in all, ROE fell to 13.6% from 16.5% a quarter ago.
We lifted our 19-20E EPS 0.7/4.2% on results, and keep our 18E EPS. We slightly raise our GGM-based TP and maintain HOLD.
Turkiye Is Bankasi is a commercial banking group based in Turkey Co. is engaged in the provision of private, retail, commercial and corporate banking, money market and securities market operations as well as international banking services. Co. provides services to corporations, SMEs and other trading companies (excluding real trading persons) within the course of its corporate and commercial operations. Co. is organized into two main business segments: Banking segment, which includes corporate, retail and private banking, as well as treasury; and non-banking operations, which are followed according to insurance, ‘investment and finance' and ‘manufacturing and trading' segments.
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