Isbank (ISCTR TI) - Spreads widen; costs under control: Maintain Buy
Isbank’s 2Q19 net income beat our and RT consensus estimates solely due to a one-off tax reversal on high provisioning reversals, while pre-tax profit was perfectly in-line with our view. Core revenue grew 13% q-q on a peer-topping core spread, higher securities yields and strong fee growth. The trading line was unsupportive on elevated swap costs. Opex growth y-y remained below inflation, while net provisioning costs fell on high reversals. Net total CoR rose on some new NPL inflows, while NPL coverage fell q-q. ROE dropped to 7.4% (private peers: 12.4%) from 11.6% in 1Q19. Adjusted for coverage, ROE would be 4.6%.
We cut our 2019-21E earnings by 19%/10%/10% to reflect 2Q results but lift our GGM-based TP to TRY7.39 (previously TRY7.09) as we prolong our forecast period leading to higher long-term ROE and hence a higher target price. 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.
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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