Isbank (ISCTR TI) - Backed by provision reversals: Maintain Buy
Isbank posted a 1Q19 net income of TRY1,458m (-34% q-q, -19% y-y), beating the RT consensus (TRY1,138m) and our estimate (TRY1,205m) on higher-than-expected provisioning reversals. Core revenues expanded 4% q-q on a wider core spread (50bp vs BNPPe: 81bp) and strong fee growth (35% y-y), despite relatively lower CPI-linker revenues (down TRY0.3b). Opex growth y-y remained below inflation at 17% (private peers: 20%). The trading line was unsupportive this quarter on unfavourable FX transactions and elevated swap costs. Net total CoR rose to 137bp from 98bp in 4Q18 on some new NPL inflows and currency impact, while NPL coverage remained flat q-q at 59%. The bank set aside TRY130m free provisions and reversed TRY1,111m generic and specific provisions this quarter. ROE dropped to 11.6% in 1Q (private peers: 13.5%).
We raise our 2019-21E earnings by 3%/3%/1% to reflect 1Q results, and lift our GGM-based TP slightly to TRY7.09. Maintain BUY.
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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