Vakifbank (VAKBN TI) - Spreads improve; ROE up: Maintain Hold
Vakifbank posted 4Q19 net income of TRY1,280m ( up 154% q-q and 23% y-y), above both our estimate (TRY954m) and RT consensus (TRY1,026m). Lower-than-expected net provisions and trading losses are to blame for the deviation. Core revenues were up 28% q-q, aided by wider core spread (up 1.8ppt q-q vs BNPPe: 2.5ppt), lower repo costs and solid fee growth (42% y-y vs BNPPe: 32%). Despite lower October CPI, linker revenues increased in 4Q owing to higher real rate and new linker purchases (TRY2bn q-q). Trading losses on swap costs continued to weigh on earnings. Opex (down 8% y-y vs top-tier peers 17% retreated on lower non-HR costs. Net provisioning expenses surged largely on new NPL inflows, while net total CoR reached to 249bp (3Q: 194bp). NPL coverage remained stable at 70% (down 70bp q-q vs top-tier peers 59%). ROE inched up to 16.1% in 4Q (top-tier peers: 9.6%) from 6.7% in 3Q.
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.
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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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