Yapi Kredi Bank (YKBNK TI) - Fresh start to 2020: Maintain Buy
Yapi Kredi posted a 4Q19 net income of TRY263m (-73% q-q, -76% y-y), above both RT consensus (TRY133m) and our estimates (TRY127m). The deviation is largely on account of lower than expected trading losses. Yapi Kredi set aside TRY140m provisions for insurance penalty and reduced its NPL coverage by 63bp to 62.5%. Adjusted for these, net income would be 9% higher at TRY288m. Core revenues were up by only 2% q-q, due to weaker linker revenues owing to low October CPI, despite widened core spread (1.1ppt q-q, BNPPe: 1ppt). Fee growth (43% y-y, BNPPe: 36%) stayed well above the opex growth (20% y-y). Net provisions rose 53% q-q on some new NPL inflows, while the net CoR surged to 481bp in 4Q from 277bp in 3Q. ROE dropped to 2.6% in 4Q from 9.7% in 3Q, which could be lowest ROE in our coverage (Akbank 10% and Garanti 9.3%).
We maintain BUY, on strong long term (2019-30E) ROE at 15.3%.
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.
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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