Vakifbank (VAKBN TI) - Spreads protected; high ROE: Maintain Buy
1Q18 net income of TRY1,051m (+17% q-q, -14% y-y) beat our estimate of TRY901m (RT consensus: TRY933m) primarily on lower effective tax rate. Higher than expected net provisions fully wiped away all the positive surprises on NII, fees and opex. Core revenues grew 2% q-q on flattish L/D spread and strong fees, despite lower CPI-linker revenues. Trading income was supportive, while opex grew mainly on promotion payments to pensioners. Net provisions, on the other hand, slid 9% q-q thanks to strong collections. Asset quality improved, while coverage dropped 8pp post IFRS 9. All in all, ROE went up 1.6bps q-q to 17.4%, one of the highest among peers.
We revise our FY18-20E EPS by +0.6%/+0.3%/+3.7%. We adjust our GGM-based TP slightly up to TRY6.74/sh (from TRY6.62) on 1Q results, while keeping our rating unchanged at BUY.
Turkiye Vakiflar Bankasi (Vakifbank) is a banking and financial services company based in Turkey. Co. offers products and services that cover corporate, commercial, investment and small-scale enterprise banking as well as the retail and private banking sectors. Co. also provides financial leasing, portfolio management, real estate, insurance and factoring services through its financial participations. Co.'s deposit products include time and demand deposits, as well as loans comprise spot loans, foreign currency indexed loans, consumer loans, automobile and housing loans, working capital loans, gold loans, foreign currency loans, eximbank loans, and pre-export loans.
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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