Earnings Review / Yapi Kredi Bank (YKBNK TI) - CPI linkers partly offset high CoR: Maintain Hold
Yapi Kredi reported 3Q18 net income of TRY1,115m (-9% q-q, +33% y-y), in line with our estimate (TRY1,091m), yet above the RT consensus (TRY1,047m). Core revenues grew 25% q-q on expanded core spread (+10bps q-q) and quarterly tripled CPI-linker revenues. Yapi Kredi revised its Oct-Oct 2018 CPI assumption used for calculating linker revenues to 16% from 9.3%. Assuming 25% CPI for October, we calculate an additional TRY3.4b in linker revenues for 4Q, which is 54bp NIM accretive. Fee income expanded by a solid 29% y-y in 3Q, while opex increased by sector-high 23% on front loaded HR costs. Asset quality deteriorated as the net total CoR soared to 374bp in 3Q from 161bp in 2Q. However, NPL coverage stays high at 82% (vs 60% for Akbank and Garanti). The CAR rose to 17.4% (+2.3pp q-q), yet 2.8pp lower without the BRSA forbearance. ROE went down to 11.4% from 14.1% a quarter ago, the lowest among peers so far.
Yapi Ve Kredi Bankasi is a financial services group. Co. serves its customers through its retail banking segment comprising of individual banking, Small and Medium Size Enterprises banking and card payment systems, corporate and commercial banking as well as private banking and wealth management segments. Co.'s operations are supported by domestic subsidiaries in asset management, brokerage, leasing and factoring as well as international banking subsidiaries in the Netherlands, Russia and Azerbaijan. As of Dec 31 2014, Co. had total assets of TL194.96 billion and total deposits of TL107.63 billion.
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