Earnings Review / Vakifbank (VAKBN TI) - Spreads widened; high ROE: Maintain Buy
2Q18 net income of TRY1,074m (+2% q-q, +20% y-y) was in line with both our estimate (TRY1,118m) and the RT consensus (TRY1,044m). Core revenues grew 12% q-q on expanded L/D spread (24bp q-q) and higher CPI-linker revenues (+10% q-q). Fee income expanded by a solid 64% y-y in 2Q18, while opex increased by 25% on branch-level expenses. Trading income was supportive in the absence of swaps. Net provisions, on the other hand, surged 85% q-q through the increase in stage II loans coupled with some new NPL inflows. Net total CoR went up to 130bp from 102bps a quarter ago with stable NPL coverage (78%). All in all, ROE slid 61bp q-q to 16.8%, still one of the highest among top-tier peers.
We revise our FY18-20E EPS by -0.3/-0.1/+7%. We raise our GGM-based TP slightly to TRY5.26/sh (from TRY5.21) on 2Q 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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