1. Ata Finance Group
«Turkish Banks 2015 First Quarter Earnings Preview»
15 April 2015
Derya Guzel
dguzel@atainvest.com
+90 (212) 310 62 89
2. Ata Finance Group
Turkish Banks – Coverage banks 1Q15 trends
2
• The banks' earnings reporting season will start with Akbank on Friday, 24th April 2015 and followed by Halkbank ( 27th
April), Garanti (28th April), TSKB (28th April ) and Yapi Kredi (8th May). The deadline to submit bank only financials is 11
May 2015.
• We estimate our coverage banks to post 4% y/y increase and 9% q/q decline in NI on an aggregate basis. On a quarterly
basis, while higher trading gains, higher other income and seasonal dividend income from subsidiaries were supportive,
lower NII (due to lower CPI income and compression in loan to deposit spreads) and higher provisions (due to higher
general provisions due to FX depreciation, regulatory effect and loan growth) should weigh on bottom lines.
• Among our coverage banks, on a quarterly basis, we expect Halkbank to post 16% q/q NI increase driven by lower
provisions (due to the high base in 4Q14 due to extra provision for one off NPL) followed by Isbank with 13% q/q
increase thanks to the TL207mn provision reversal and the lowest NIM contraction among the peers. On the other hand,
Vakifbank should post the steepest q/q NI decline mainly due to the one off gain from the Visa-Mastercard sale which
was booked in 4Q14. As a small cap pick, TSKB with TL92mn NI (13% q/q increase) should also stand out from the
crowd. We expect c.45bps NIM contraction for our coverage banks on q/q basis, Isbank with 30bps (thanks to CPI
calculation methodology), Akbank with 35bps (thanks to good NIM management) and TSKB with 30bps (thanks to stable
loan spreads) should stand out when compared on margin evolution.
• On an aggregate basis, we expect 1% q/q decline in the fee and commission income but 11% y/y increase. Quarterly
slower fee generation can be attributed to: lower volume growth, regulatory effect and lack of seasonal a/c maintenance
fees (Akbank, Yapi Kredi and Isbank collects them in 2Q-4Q) in some cases and deceleration in credit card loans.
• On the opex side, on an aggregate basis, while we expect cost to remain flat q/q, on a y/y basis we foresee 18% increase
in cost. Depreciation of TL, seasonal bonus payments and increased trend in fee rebates (linked with consumer
protection committee) should cause cost to increase on a yearly basis.
• Although margins are trending below what the banks were guiding, we don’t expect to see bank managements to revise
their full year budget guidance's as whole during 1Q15 earnings calls. Supported by higher income on CPI linked bonds,
we foresee improvement in NIM in 2Q15.
6. Ata Finance Group
Akbank (AKBNK TI, Outperform, TP TL9.70)
6
• We expect Akbank to post TL692mn NI for the quarter, indicating
23% q/q decline and 6% y/y increase. Quarterly decline in NI is
likely to be mainly due to seasonally lower fees, higher opex and
higher provisions. Higher trading gains and higher other income
should be supportive.
• We expect both loan growth (Akbank flat q/q vs sector 6%) and
deposit growth (Akbank 4% vs sector 6%) during the quarter to lag
the sector average, mainly to defend the margins and selective
growth. Mainly due lower CPI income, (TL431mn in 4Q14 vs.
TL200mn in 1Q15E) we foresee Akbank’s NIM to decline by 35bps
q/q.
• Akbank collects a/c maintenance fees in 2Q-4Qs. Mainly due to the
seasonality as and regulatory effect, we expect Akbank’s fee &
commission income to decline by 10% q/q. Fee income growth of
2% y/y currently stands behind Akbank’s annual budget guidance
of 5-7% and our 10% estimate. We expect to see some
improvement in fee collection with the pick-up in volumes in 2H15.
• We estimate opex to increase by 10% q/q and 26% y/y. Sharp
increase in cost is caused by higher fee rebates and TL25mn one
off cost guided by the bank as well as FX deprecation.
• We expect the bank to book TL29mn dividend income from its
subsidiaries.
• Due to both FX volatility and regulatory effect, we expect general
provisions to increase, which will push the total provisions upwards
both q/q and y/y basis.
• On a q/q basis, we expect NPL ratio to remain flat and collections
levels to be close to 4Q14. Please recall that Akbank sold TL249mn
NPL during the quarter and realised a gain of TL40mn from NPL
sale which will be booked under other income line.
AKBNK
Income statement summary 1Q15E 1Q14 y/y D 4Q14 q/q D
Net interest income 1,700 1,672 2% 1,821 -7%
Fees and commissions 519 510 2% 579 -10%
Trading gains (Trading + FX) 90 -234 N/M 38 139%
Bank revenues 2,309 1,948 19% 2,437 -5%
Operating expense total -1,086 -863 26% -987 10%
Operating income 1,223 1,085 13% 1,450 -16%
Associates 29 27 6% 0 N/M
Cash flow 1,252 1,112 13% 1,450 -14%
Total provisions -550 -485 13% -434 27%
Other income 185 197 -6% 125 48%
EBT 887 824 8% 1,141 -22%
Taxes -195 -172 13% -246 -21%
Net income 692 651 6% 894 -23%
Source: Company data, Ata Invest Estimates
7. Ata Finance Group
Garanti (GARAN TI, Marketperform, TP TL9.90)
7
• We expect Garanti to book TL676mn NI in 1Q15, indicating a
13% q/q and 11% y/y decline. Quarterly bottom-line decline was
mainly due to the lower NII, while lower trading loss and higher
other income were supportive.
• Driven by higher yielding GPL and mortgage lending, we expect
Garanti’s loan growth (8% q/q vs sector 6%) to realise above the
sector. Driven by FX deposit base, total deposit growth of 8% q/q
should also outpace the sector average 6%.
• Mainly due to lower income on CPI linkers (TL420mn 4Q14 vs
TL220mn 1Q15E) and deceleration in loan to deposit spread, we
expect Garanti’s NIM to decline by c.60bps q/q.
• On the trading side, negative effect of swap cost somehow
eased as the bank was active in bond trading, hence we expect
1Q15’s trading loss to be smaller than that of 4Q14.
• We expect total fees to increase by 3% q/q but increase by 3%
y/y. Decline of 3% y/y is in line with the Garanti’s budgeted
guidance while quarterly fee increase is supported by seasonal
a/c maintenance fees and loan growth.
• On the opex side, we expect cost to increase 2% q/q and 16%
y/y, on the back of acceleration in fee rebates + FX depreciation.
• On the other income side, we expect collections to be stronger
than expected and NPL sale gain of TL14.5mn. Total other
income line should be higher both on y/y and q/q basis.
GARAN
Income statement summary 1Q15E 1Q14 y/y D 4Q14 q/q D
Net interest income 1,860 1,601 16% 2,159 -14%
Fees and commissions 710 730 -3% 688 3%
Trading gains (Trading + FX) -35 56 -163% -138 -75%
Bank revenues 2,535 2,387 6% 2,708 -6%
Operating expense total -1,280 -1,102 16% -1,258 2%
Operating income 1,255 1,285 -2% 1,450 -13%
Associates 0 0 N/M 0 N/M
Cash flow 1,255 1,285 -2% 1,450 -13%
Total provisions -535 -411 30% -503 6%
Other income 170 130 30% 76 123%
EBT 890 1,004 -11% 1,024 -13%
Taxes -214 -243 -12% -246 -13%
Net income 676 760 -11% 778 -13%
Source: Company data, Ata Invest Estimates
8. Ata Finance Group
Halkbank (HALKB TI, Outperform, TP TL18.00)
8
• We estimate TL513mn NI for 1Q15, which indicates 16% q/q
increase and 3% decrease y/y. Quarterly increase is mainly
driven by lower provisions, as the bank booked TL200mn
provision for the big ticket NPL during previous quarter.
• We expect Halkbank to post 6% q/q loan growth, which in line
with the sector however on the funding side 3.5% deposit growth
lag behind the sector’s 6% growth. Both loan and deposit growth
should be driven by FX segment.
• Mainly due to the compression in loan to deposit spreads and
lower income CPI linkers, (TL240mn in 4Q14 vs TL120mn in
1Q15) we expect NIM to decline by 50bps q/q.
• On the asset quality side, we expect NPL ratio to improve on q/q
basis. While collections are close to 4Q14 levels, gross NPL
inflow should show signs of improvements.
• On the fee side, we expect to see above budget (10%) y/y
growth and also some improvement on q/q basis. Strong fee
growth should be the results of increased fees as Halkbank is
trying to bring the fees to its peer average levels and also
charging fees for uncovered areas.
• As it is becoming a sector wide issue, fee rebates also caused
Halkbank’s opex to increase 3% q/q and 19% y/y.
• For the last couple of years Halkbnak has been booking the
dividend income received from subsidiaries in 1Q and 2Q,
however this year management advised that all the dividend
income will be booked in 2Q15, we believe this is mainly to
smooth out the effect of TL350mn provision which is due to be
booked in 2Q.
HALKB
Income statement summary 1Q15E 1Q14 y/y D 4Q14 q/q D
Net interest income 1,315 1,162 13% 1,414 -7%
Fees and commissions 310 222 40% 303 2%
Trading gains (Trading + FX) 15 -80 -119% 15 -1%
Bank revenues 1,640 1,304 26% 1,732 -5%
Operating expense total -820 -689 19% -793 3%
Operating income 820 614 33% 939 -13%
Associates 0 99 -100% 8 N/M
Cash flow 820 714 15% 947 -13%
Total provisions -300 -194 55% -476 -37%
Other income 129 124 4% 99 30%
EBT 649 644 1% 570 14%
Taxes -136 -113 20% -128 6%
Net income 513 530 -3% 442 16%
Source: Company data, Ata Invest Estimates
9. Ata Finance Group
Isbank (ISCTR TI, Outperform, TP TL7.90)
9
• We estimate TL926mn net income for the quarter (up 13% q/q
and up 14% y/y). We expect net income to be supported by
higher other income (reversal of TL207mn one-off tax provision),
seasonal dividend income and lower opex (due to couple of one-
offs in 4Q14) while lower trading gains and higher provisions
(due to loan growth, FX depreciation and regulatory effect)
should counterbalance.
• We expect Isbank to post slightly above sector loan growth
(Isbank 7% vs sector 6%) driven by FX loans. On TL side,
lending growth was driven by GPLs. On the funding side, we
expect TL deposits to stay flat however driven by FX deposits,
we expect overall deposit growth (Isbank 8% vs sector 6%) to be
above the loan growth hence improving LDR during the quarter.
• While loan to deposit spread should decelerate compared to
4Q14, thanks to the different calculation methodology, income
on CPI linkers should remain stable q/q (TL 227mn in 4Q14)
hence NIM decline q/q basis in Isbank c.30bps should be lower
than the peers.
• On asset quality, we foresee slight deterioration (10bps q/q) in
NPL ratio due to slower collections. This increase is in line with
budgeted guidance of 20-30bps increase. Isbank also advised
that, there was a small NPL sale during the quarter. Coverage
ratio should remain unchanged q/q.
• As indicated by Isbank’s KAP announcement, the bank is due to
book TL207mn provisional reversal related to tax fine during the
quarter under other income line.
• Although we expect bank to book some part of its annual
dividend income in 1Q15 (TL165mn), we expect bigger part of
the dividend income to booked in 2Q15.
ISCTR
Income statement summary 1Q15E 1Q14 y/y D 4Q14 q/q D
Net interest income 1,900 1,772 7% 1,995 -5%
Fees and commissions 525 463 13% 501 5%
Trading gains (Trading + FX) 50 86 -42% 133 -62%
Bank revenues 2,475 2,321 7% 2,629 -6%
Operating expense total -1,400 -1,272 10% -1,567 -11%
Operating income 1,075 1,049 2% 1,062 1%
Associates 165 203 N/M 0 N/M
Cash flow 1,240 1,252 -1% 1,062 17%
Total provisions -450 -553 -19% -191 135%
Other income 367 341 8% 146 151%
EBT 1,157 1,041 11% 1,017 14%
Taxes -231 -225 3% -198 17%
Net income 926 815 14% 819 13%
Source: Company data, Ata Invest Estimates
10. Ata Finance Group
Vakifbank (VAKBN TI, Outperform, TP TL6.28)
10
• We estimate Vakifbank to post TL451mn net income during
the quarter (down 34% q/q and up 21% y/y). Quarterly decline
in NI is mainly due to the lower other income (as the bank
booked TL290mn one-off from Visa-Mastercard sale) while
TL70mn dividend income and higher trading gains should
smooth out the bottom line decline.
• Driven by FX lending, GPLs & mortgages we foresee
Vakifbank to post above sector loan growth (Vakifbank 7.5%
vs sector 6%). On the funding side, driven by FX deposit base
total deposit growth at 7.5% should also outpace sector’s 6%
growth. Hence LDR should remain flat on q/q basis.
• Mainly owing to the compression in loan to deposit spreads as
well as lower income on CPI linkers, we foresee c.50bps q/q
NIM decline.
• We foresee Vakifbank’s total fee and commission income to
increase by 2% q/q and 34% y/y mainly driven by lending
growth.
• Due to increase in fee rebates and FX deprecation, we expect
3% q/q and 19% y/y increase in opex.
• Although collections were slower than 4Q14, thanks to the
loan growth and reasonable NPL inflow, we expect to see
10bps improvement in NPL ratio but some decline in
coverage ratio.
• Mainly due to the TL290mn one-off gain from Visa-Mastercard
sale booked in 4Q14, we expect other income to decline by
53% q/q. However, on the back of stable collections pace, we
foresee other income line to increase by 12% y/y.
VAKBN
Income statement summary 1Q15E 1Q14 y/y D 4Q14 q/q D
Net interest income 1,280 1,059 21% 1,346 -5%
Fees and commissions 195 145 34% 191 2%
Trading gains (Trading + FX) 45 72 -38% 37 20%
Bank revenues 1,520 1,277 19% 1,575 -3%
Operating expense total -844 -734 15% -821 3%
Operating income 676 543 25% 754 -10%
Associates 70 65 8% 0 N/M
Cash flow 746 608 23% 754 -1%
Total provisions -425 -376 13% -449 -5%
Other income 250 224 12% 535 -53%
EBT 571 456 25% 840 -32%
Taxes -120 -82 46% -157 -24%
Net income 451 374 21% 683 -34%
Source: Company data, Ata Invest Estimates
11. Ata Finance Group
Yapi Kredi (YKBNK TI, Marketperform, TP TL5.05)
11
• We expect Yapi Kredi to book TL502mn NI during the
quarter, down by 4% q/q but up by 3% y/y. On a quarterly
basis, while higher other income to be supportive, lower NII,
higher trading loss and lower fees should weigh on the
profitability.
• Mainly due to lower spreads and lower income on CPI
linkers, we expect NIM to decline by 50bps on q/q basis.
• We foresee Yapi Kredi’s loan growth to come slightly above
the sector; however deposit growth to outpace the sector’s
growth (mainly on FX deposits) hence LDR should improve
q/q basis.
• Mainly due to slower collection and continued NPL inflow
from unsecured lending side, we expect NPL ratio to increase
10bps while coverage ratio to decline q/q basis.
• We expect Yapi Kredi to book TL135mn dividend income
during the quarter.
• We foresee opex to decline by 1% q/q. However, mainly due
to the continuing investment cycle and higher fee rebates, we
estimate cost to increase by 27% y/y basis.
• We estimate Yapi Kredi’s total fees to decline by 4% q/q
basis due to lack of a/c maintenance fees (the bank collects
them 2Q-4Qs). However, we expect higher loan growth to
support fees to post 20% y/y increase.
• Yapi Kredi is due to publish its 1Q15 results on 8 May 2015.
YKBNK
Income statement summary 1Q15E 1Q14 y/y D 4Q14 q/q D
Net interest income 1,400 1,258 11% 1,558 -10%
Fees and commissions 575 480 20% 596 -4%
Trading gains (Trading + FX) -35 -213 -84% -4 688%
Bank revenues 1,940 1,525 27% 2,149 -10%
Operating expense total -1,110 -875 27% -1,104 1%
Operating income 830 650 28% 1,045 -21%
Associates 135 174 N/M 0 N/M
Cash flow 965 824 17% 1,045 -8%
Total provisions -525 -434 21% -503 4%
Other income 195 185 6% 127 54%
EBT 635 575 11% 669 -5%
Taxes -133 -88 52% -143 -7%
Net income* 502 487 3% 525 -4%
Source: Company data, Ata Invest Estimates
12. Ata Finance Group
TSKB (TSKB TI, Outperform, TP TL2.58)
12
• We estimate TL92mn NI (up by 13% q/q and down by 3%
y/y). Quarterly NI should be supported by higher trading gains
and dividend income while higher provisions and higher other
income (due to the release of free provision) should
counterbalance.
• While we expect stable loan-funding spreads, we foresee
income on CPI linkers to decline, (TL30mn in 4Q14 vs
TL17mn in 1Q15E) implying 30bps decline in NIM q/q.
• In line with the trend in the sector, we expect to see some
worsening in TSKB’s NPL ratio during the quarter hence
higher provision level. To smooth out the provision effect, we
expect TSKB to reverse some free provision that it has set
aside (as of 4Q14 the bank has total TL83mn free provision).
• We expect TSKB's NPL ratio to go up by 10bps to 0.25%.
This is in line with the TSKB budget NPL ratio guidance of
0.3% for 2015.
• The bank will be publishing its 1Q15 financials on 27 April
2015, there will not be an earnings call as TSKB holds
earnings calls only on semiannual basis.
TSKB
Income statement summary 1Q15E 1Q14 y/y D 4Q14 q/q D
Net interest income 128 140 -9% 133 -3%
Fees and commissions 3 2 37% 4 -24%
Trading gains (Trading + FX) 5 -1 N/M 3 99%
Bank revenues 136 142 -4% 139 -2%
Operating expense total -25 -23 7% -25 -1%
Operating income 111 118 -6% 114 -2%
Associates 12 9 32% 1 N/M
Cash flow 123 127 -3% 115 7%
Total provisions -30 -40 -26% -14 119%
Other income 23 31 -25% 1 N/M
EBT 116 117 -1% 102 13%
Taxes -24 -24 0% -21 13%
Net income 92 94 -2% 81 13%
Source: Company data, Ata Invest Estimates
13. Ata Finance Group 13
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Sales Title Tel E-mail
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Mert Ozener Sales 90-212-310-6267 mozener@atainvest.com
Research Title Tel E-mail
Cemal Demirtas Head of Research 90-212-310-6428 cdemirtas@atainvest.com
DUBAI
14. Ata Finance Group
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For the purposes of our research report, our rating system is defined as follows;
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