Yapi Kredi Bank (YKBNK TI) - Good top-line; NPL coverage down: Maintain Hold
Yapi Kredi posted a 3Q19 net income of TRY976m (-13% q-q, -12% y-y), in line with both RT consensus and our estimates. Core revenue was almost flat q-q on widened core spread and higher securities yield. Fee growth stayed well above the opex growth. Net provision rose 8% q-q largely on BRSA stipulated NPL formation, while net CoR levelled out at 271bp. NPL coverage dropped to 63% from 66% in 2Q as the bank sold TRY390m of NPLs in 3Q. If we adjust the NPL coverage for the NPL sale, the coverage would be 64%. Reported ROE dropped to 9.7% in 3Q (Akbank 11.1%, Garanti 10.2%) from 11.3% in 2Q. Coverage-adjusted ROE would be 6.5% (Akbank 10.0%, Garanti 15.0%).
We revise 2019-21E earnings by -5.7%/+2.5%/-0.3%, keep our GGM-based TP at TRY2.51 and maintain HOLD.
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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