1. Company Report
Banking Sector
19 July 2012
Sustainable Banking…
Derya Guzel
Research Analyst
dguzel@sekeryatirim.com
Advantageous funding ability...Low cost & long
term funding enables the bank to execute long term
lending, and hence less volatile loan yields should
result in resilient NIM, in our view. It is no
coincidence that medium and long term loans
account for 88.7% of TSKB’s total lending book, but
rather, part of a sustainable strategy. TSKB matches
funding with lending, and thus has no currency and
maturity mismatch on its loan book. We expect TSKB
to be one of the players within the Turkish banking
universe to maintain its NIM above 4%, at least over
the next two years, and it should even subsequently
be able to extend margins. We forecast 4.2% NIM in
2012 and estimate a sustainable NIM level of 4%
thereafter. Thanks to its long-standing relationships
with multilateral agencies backed by Turkish
Treasury Guarantee, TSKB has had the ability to
borrow funds even during crises. In 2009 it was able
to borrow USD 1,039mn from multilateral agencies in
total. The only risk in our view is the need to find
the right loan segments and project finance deals to
channel funds.
Superior asset quality... With a 0.40% NPL ratio
TSKB has the lowest NPL’s within the sector, vs. the
sector’s 2.7% NPL ratio (based on weekly BRSA data
as of 22nd June’12). TSKB’s superior asset quality is
mainly due to: 1) An extensive knowledge of the loan
segments the bank operates 2) Its involvement
throughout the project financing life cycle, and its
provision of advice to borrowers, hence any risk of
asset quality problems being discovered at an earlier
stage, 3) And finally a lack of exposure to retail
lending (i.e credit cards or mortgages).
Successful track record in delivering highest ROE...
TSKB has been one of the highest ROE earners of the
banking sector. Between 2005 and 2011 it managed
to deliver average ROE of 19.3% to its investors. And
we estimate it ending 2012 above 20% ROE followed
by 19.2% and 19% in 2013F and 2014F, respectively.
Valuation, recommendatation and risks... We rate
TSKB “Outperform” with a 12M target price of
TRY2.42. The stock trades on PBR of 1.29x and PER
of 6.8x on our 2012 estimate. Slower than expected
GDP growth is a downside risk to our loan growth,
earnings and NPL estimates, whereas moving into the
infrastructure segment is an upside risk to our loan
growth estimate as there are several still incomplete
infrastructure privatisation deals in the PA’s
pipeline.
TSKB- Türkiye Sinai Kalkınma Bankası
Şeker Securities Research
OUTPERFORM
TP: TRY2.42
‐
0.50
1.00
1.50
2.00
2.50
0
20
40
60
80
100
120
140
18/07/2011 18/01/2012 18/07/2012
Xbank relative Share Price (TRY)
Performance TRY USD
Close 1.82 1.01
High, 52w 1.91 1.07
Low, 52w 1.21 0.67
Ticker
# of Shares, mn 1,100.0
Return 1 M YOY YTD
TRY Return (%): 6.4 4.5 41.6
US$ Return (%): 6.7 -4.8 50.0
ISE-100 Relative (%): -0.7 3.8 16.3
Avg. Daily Vol. (TRY Mn): 3.68
Avg. Daily Vol. (US$ Mn): 2.06
TSKB.TI /TSKB.IS
Quick Facts 2011A 2012E 2013E
Net Income (TRYm) 255 299 327
% Change, YoY 17.0% 9.4%
NPL (%) 0.40 0.45 0.60
NIM (%) 4.2 4.0 4.1
Multiples 2011A 2012E 2013E
P/E (x) 7.9 6.8 6.2
P/BV (x) 1.48 1.29 1.10
Valuation
Current Price, TRY 1.82
Target Price, TRY 2.42
Upside Potential 33%
Rating OP
Target Mcap, TRYbn 2,662
2. 19 July 2012
Banking Sector | TSKB P a g e | 1
Investment Case
Low cost & long term funding allows the bank to lend at long term, and hence less
volatile loan yields should result in resilient NIM, while having no retail lending
exposure provides further margin immunity in our view. It is no coincidence that
medium and long term loans account for 88.7% of TSKB’s total lending book, but
rather part of a sustainable banking strategy. TSKB matches funding through
lending, and hence has no currency and maturity mismatch on its loan book. We
expect TSKB to be one of the players within the Turkish banking universe to
maintain its NIM level above 4%, at least over the next two years, and even to be
able to subsequently extend margins.
TSKB has one the highest ROE ratios among our banks coverage after Halkbank.
Between the years of 2005-2011 it managed to delivery its investors an average
ROE of 19.3%. We estimate TSKB ending 2012 above 20% ROE followed by 19.2%
and 19.0% in 2013F and 2014F, respectively. We expect our 20% ROE estimate in
2012F to be driven by 1) 16% loan growth in local currency terms, 2) estimated
4.2% NIM for 2012 and 4.0% sustainable NIM level thereafter, 3) 14% net interest
income growth, 4) 0.45% NPL ratio, 5) 10% fee growth and 6) opex growth of
around 9%.
Robust asset quality: the best within the sector....
With a 0.40% NPL ratio TSKB has the lowest NPL’s within the Banking sector in
Turkey, vs. the sector’s 2.7% (based on weekly BRSA data as of 22nd
June’12).
TSKB’s high NPL ratio from 2001 until 2004 was due to a legacy NPL portfolio
acquired via Isbank group companies. However, as of 2004 TSKB’s NPL ratio
evolution has fallen short of the banking sector. TSKB’s NPL ratio from 2008 to
Mar’12 averaged at 0.53%, one of the lowest in the sector.
TSKB has superior asset quality mainly due to: 1) Its extensive knowledge of the
segments it operates in, 2) its involvement throughout the project financing life
cycle and offering advice to borrowers, hence earlier capture of any asset quality
risks, 3) And finally a lack of exposure to retail lending (credit cards or
mortgages).
Figure 1: TSKB quarterly NPL ratio (%) evolution vs. sector
0.0
2.0
4.0
6.0
8.0
10.0
12.0
Sector TSKB
TSKB has the lowest
NPL ratio in the
sector (TSKB 0.4%
vs. 2.7% sector)
Source: BRSA
3. 19 July 2012
Banking Sector | TSKB P a g e | 2
A better than sector NPL ratio may raise questions over its sustainability. However,
we believe that as the bank is not active in the retail segment the risk of sharp
NPL ratio deterioration is minimal. We expect TSKB to end the year with a 0.45%
NPL ratio, vs. our 3.2% expectation for the Turkish Banking sector. The downside
risk to our NPL ratio is that since TSKB’s ticket size in lending is quite large when
compared to the sector (especially in project finance), the addition of just one
corporate file to NPL would increase the NPL ratio sharply.
The Bank has a 100% provisioning policy for all non-performing loans regardless of
collateral attached to the loan. TSKB has had no NPL write-off or sale policy for
the past twenty years, and our impression from meetings with the bank is that it
has no plans to change its policy going forward.
Lending portfolio: long term & FX loans concentrated
Its aim, as a Turkish industrial Development Bank, is to assist enterprises in all
sectors, but with special emphasis on the industrial sector. Given this special focus
the bank is able to obtain long term & low cost funds from financial institutions. The
joint aim of these multilateral agencies is to offer financial aid to emerging market
economies, including Turkey. In that sense, TSKB is effectively an intermediary
between Turkish companies and multilaterals, hence funds borrowed by it from
these agencies receive a Turkish Treasury guaranty.
35% of TSKB’s total loan book as of March-2012 consists of loans provided to the
energy generation sector. In line with its overall mission of becoming the leading
financer of the renewable energy sector, the bank as of 2009 included energy
efficiency project financing in its portfolio. Indeed, as of end-Dec-11 it had financed
a total of 93 renewable energy projects. However, at our meetings with TSKB
management they have emphasized that going forward the focus would be on
infrastructure projects as the segment attracts more investors and offers long-term
business prospects. Please remember that based on the data published by the
Central Bank of the Republic of Turkey (CBT), Turkey’s privatisation efforts have
generated USD 44bn over the past eight years, and that there are numerous areas
i.e. Infrastructure and energy generation which remain partially executed.
Figure 2: Sectoral distribution of TSKB’s loan book
35%
13%
10%
9%
7%
7%
6%
6%
5%
4%
0% 5% 10% 15% 20% 25% 30% 35% 40%
Energy production
Finance
Other
Logistics
Non‐residential Real Estate
Metal and machinery
Electricity/Gas distribution
Chemistry and Plastics
Construction
Tourism
Source: Company data
APEX lending: TSKB is
acting as an
intermediary between
Turkish companies
and multilateral
agencies
4. 19 July 2012
Banking Sector | TSKB P a g e | 3
TSKB also has a unique way of lending to SMEs, namely APEX lending, whereby the
Bank operates as an agent between banks and multilateral agencies, whereby it
carries no NPL risk. And considering that the SME segment is one of the highest NPL
generators within the lending book in times of economic downturn, no direct
exposure to SMEs (in TSKBs case via Apex lending) provides an extra support to the
NPL ratio. Currently, 11% of TSKB’s total loan book comprises APEX loans, down from
18% in 2010. This year the bank obtained a USD300mn loan via the European
Development Bank for use in APEX lending, and we expect TSKB to use at least
USD200mn of it this year. Hence, we anticipate a slight increase in Apex lending
over the coming quarters.
In 2009 with the issuance of a Turkish Lira corporate bond the bank was able to lend
in local currency. Yet as there is currently no demand for Turkish Lira loans, TSKB is
inactive in such lending. However, we believe that with the rates on a gradual
decline there might be a business opportunity for TSKB to engage in long term local
currency borrowing and lending.
As of March’12 98% of TSKB’s loan book is foreign currency dominated, hence the
bank doesn’t carry any currency mismatch, unlike others. When considering the FX
lending portfolio in detail we see that 44% of total lending is in EUR and 54% in USD,
and that the lending portfolio has an average maturity of 5 years.
It is no coincidence that medium and long term loans account for 88.7% of TSKB’s
total lending book, but rather a part of its sustainable banking strategy. As of Dec-
11, 11.3% of the bank’s loan portfolio comprised loans of less than one year (down
from 14.9% a year earlier), 41.9% of loans are up to 5 years and 38.1% were longer
than 5 years, with 8.7% having maturities of over 10 years. The share of loans of
over 10 year maturity within the total loan book has been rising steadily over the
years (to 8.7% in 2011 from 4.7% in 2009).
Figure 3: Loan book maturity as of Mar’12 Figure 4: Funding maturity as of Mar’12
46.8% of loan book
consists of loans up
to longer than 5
years
46.8% of loan book
consists of loans of
longer than 5 year
maturity
Further increase in
Apex lending over
coming quarters
TSKB may become
more active in local
currency lending
going forward with
favorable rates
Demand
0%
Upto 1m
5%
1‐3m
4% 3‐12m
6%
1‐5yrs
35%
5yrs +
50%
Source: Company data, Seker estimates
Demand
0%
Upto 1m
2%
1‐3m
4%
3‐12m
16%
1‐5yrs
57%
5yrs +
21%
Source: Company data, Seker estimates
98% of TSKB’s LT
loan portfolio is FX
dominated
5. 19 July 2012
Banking Sector | TSKB P a g e | 4
Funding Structure: “Long Term & Low Cost Funding”
Of total funds borrowed, 93% are long term funds. As of 1Q’12 TSKB has USD3,525mn
of long term and USD282mn of short term funds available for utilization. Since 2009,
total funding agreements TSKB has signed amount to USD1,895mn. Short terms funds
are made up of syndication loan agreements and money market instruments.
Due to its investment and development bank status, TSKB by law is not permitted to
collect deposits, but rather, is able to obtain long term & low cost funds from
multilateral financial institutions such as World Bank (IBRD), European Investment
Bank (EIB), Council of Europe Development Bank (CEB), Kreditanstalt für
Wiederaufbau (KfW), Agence Francaise de Developpement (AFD), International
Finance Corporation (IFC) and European Bank for Reconstruction and Development
(EBRD). The joint aim of these multilateral agencies is to offer financial aid to
emerging market economies, including Turkey. In that sense TSKB acts as an
intermediary between Turkish companies and the above-mentioned agencies, which
means that 100% of long term funds obtained via multilateral agencies are Treasury
guaranteed.
Thanks to its long standing relations with multilateral agencies and Turkish Treasury
Guarantee, TSKB has enjoyed the ability to borrow funds even in times of crisis. In
2009 the bank was able to borrow USD1,039mn in total from multilateral agencies.
The sole risk in our view involves finding the right loan segments and project finance
deals to channel funds. As of March-2012 repo funding comprises 12% of TSKB’s
liabilities, with 65% made up of long term funds, 15% equity and the remaining 8%
other liabilities.
Figure 5: Multilateral funding agreements signed by year (USDm)
279
549
1,039
121
660
‐
200
400
600
800
1,000
1,200
2007 2008 2009 2010 2011
Since 2009 total
funding agreements
signed by TSKB
amount to
USD1,895mn.
Thanks to its long
standing relations,
TSKB has had the
ability to borrow
funds even during
crises.
Source: Company data, Seker estimates
6. 19 July 2012
Banking Sector | TSKB P a g e | 5
Since TSKB borrows long term in FX, (the average maturity of its long term funding
base is 12 years) and it lends long in FX (medium and long term loans account for
88.7% of TSKB’s total lending book), hence TSKB doesn’t carry maturity or currency
mismatch between its funds and loan book.
Figure 6: Duration of TSKB’s funding base Figure 7: Outstanding funding base (USDm)
Figure 8: TR Banks balance sheet maturity mismatch as at Mar-12
Akbank Garanti Halk Isbank Vakif YKB TSKB Akbank Garanti Halk Isbank Vakif YKB TSKB
Assets
Demand 15.1 7.5 2.1 17.6 11.6 8.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Upto 1m 17.4 22.5 8.2 23.6 6.1 16.5 0.3 0.1 0.1 0.0 0.1 0.0 0.1 0.0
1-3m 10.0 8.0 7.3 9.2 3.4 7.4 0.3 0.1 0.1 0.2 0.1 0.1 0.1 0.1
3-12m 18.6 13.2 23.3 25.3 14.2 18.1 1.5 1.0 0.7 1.8 1.2 1.1 1.3 1.2
1-5yrs 54.0 65.3 40.7 55.4 41.5 26.2 5.3 14.1 15.8 15.5 12.3 15.8 8.9 20.1
5yrs + 20.3 28.0 9.5 21.3 15.2 24.3 1.8 7.1 9.0 4.8 6.3 7.7 11.0 9.2
Not specified 2.1 4.2 3.4 10.2 2.8 5.1 0.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Total 137.7 148.6 94.5 162.6 94.6 106.0 9.5 22.4 25.7 22.4 19.9 24.7 21.4 30.5
Liabilities
Demand 9.7 16.4 16.1 17.2 8.9 12.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Upto 1m 64.3 71.7 43.6 78.1 47.0 44.1 1.4 0.2 0.2 0.2 0.2 0.2 0.2 0.1
1-3m 19.7 14.4 11.4 25.1 16.7 15.7 0.3 0.3 0.2 0.2 0.3 0.4 0.3 0.1
3-12m 14.5 10.9 9.3 12.9 6.9 9.2 0.4 0.8 0.6 0.7 0.6 0.5 0.6 0.3
1-5yrs 8.8 9.5 2.3 4.4 1.8 9.0 2.4 2.3 2.3 0.9 1.0 0.7 3.1 9.0
5yrs + 2.5 4.4 1.8 1.1 1.7 2.6 3.4 0.9 1.4 0.9 0.3 0.8 1.2 17.1
Not specified 18.2 21.3 9.9 23.7 11.7 13.3 1.7 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Total 137.7 148.6 94.5 162.6 94.6 106.0 9.5 4.5 4.7 3.0 2.5 2.7 5.4 26.5
18.0 21.0 19.4 17.4 22.0 16.0 4.1
TLbn Months
Maturity GAP
Long term
funding , 93%
Short term
funding, 7%
2,036
2,513
2,848
3,016
3,351
3,525
640
413
94
258 296 282
‐
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
2007 2008 2009 2010 2011 1Q 2012
Long term funds Short term funds
Source: Company data Source: Company data
7. 19 July 2012
Banking Sector | TSKB P a g e | 6
Fee & Commission generation: we see limited growth potential...
The share of TSKB’s fee & commission business within total banking revenues, at
2% is rather small when compared to Tier 1 banks. TSKB’s main source of fee
income stems from non-cash lending activities, which account for around 69% of
fee & commission income.
Other contributors to fee & commission income are brokerage (19%), fund
management (4%), and the corporate finance business (8%). Due to the regulatory
cap on fund management fees, its share within total fee & commission income
declined to 4% in 1Q12 from 15% in 2010. Corporate finance related fees are also
subject to volatility depending on market conditions and GDP growth. Mainly
stemming from IPO and fixed income related deals, TSKB’s corporate finance
related fees fell to 8% in 1Q12 from 36% in 2010. Recall that in 2010 TSKB was
involved in a number of high profile IPOs, including Emlak REIT, the largest IPO of
2010, and the fifth largest in the ISE’s history.
As mentioned above, driven by corporate finance activities in 2010, TSKB managed
to grow its fee income base by 93.9%, although slower GDP growth decreases fee
income. We foresee TSKB growing its fee & commission income by 10.6% in 2012
driven mainly by non-cash loans.
We foresee limited growth in TSKB’s fee & commission income over the coming
few years. We forecast fee income stabilizing at around 3% of total banking
revenues from 2013F onwards, and the non-cash loan segment remaining the
largest contributor to fee income. The upside risk to our fee income estimate
would be TSKB involvement in another major IPO, or else further infrastructure
segment privatisation activities in the coming years.
Figure 9: Fee & commission income growth estimates
Fee & commission
income currently
accounts for 2% of
total banking
revenues.
We estimate fee
income stabilizing
at around 3% of
total banking
revenues from
2013F onwards
‐10.6 ‐9.9
‐36.1
‐19.9
81.5
93.9
‐26.8
10.6
11.4
23.0
‐60.0
‐40.0
‐20.0
0.0
20.0
40.0
60.0
80.0
100.0
120.0
2005 2006 2007 2008 2009 2010 2011 2012F 2013F 2014F
Source: Company data, Seker estimates
8. 19 July 2012
Banking Sector | TSKB P a g e | 7
OPEX: Low cost to income due to lack of branch network
For the past three years, TSKB’s opex growth has averaged at 8%, and in 2011 the
bank managed meagre growth of 4% in this item. We estimate around 9% higher
costs for the bank in 2012F, and 13% in 2013F, mainly driven by HR costs. Staff-
related cost make up 62% of TSKB’s total operating expenditure as of March 2012.
Due to its corporate and development bank status TSKB doesn’t collect deposits,
or operate in the retail segment. Hence it has just 3 branches and a headquarters
based in Istanbul, and as of 1Q12 employs 347 personnel. Duly, TSKB’s cost to
income ratio of around 18% is well below the average of 50% for deposit banks.
Foreign ownership of free float
While during the crisis TSKB experienced some decline in its foreign ownership in
free float as of 2010, we now observe a steady rise in foreign interest in the stock.
As of June 2012, foreign ownership stands at 52.2%, vs. 51.8% in the same period a
year ago.
Figure 10: TKSB Expense ratios forecasts 2012-2014F
Figure 11: TSKB’s foreign ownership of free float 2005- March 2012 (%)
Expense ratios (%) 2010 2011 2012F 2013F 2014F
Cost/income 20.4 17.9 18.8 17.9 18.9
Cost/NII plus fees 20.1 17.3 18.4 17.7 18.8
Fees coverage of Opex 21.6 15.2 19.7 20.4 20.0
Cost/Total assets 0.9 0.7 0.8 0.7 0.7
Source: Company data and Seker estimates
Source: ISE and Company data
52.70%
49.40%
41.80% 41.50%
37.80%
53.40%
50.10%
52.20%
0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
As of Jun’12 the
foreign ownership of
TSKB’s free float
stands at 52.2%, vs.
51.8% in the same
period a year ago
HR cost makes up
62% of Opex in
March 2012
TSKB’s has a cost
income ratio of
around 18%, vs. 50%
in deposit banks
9. 19 July 2012
Banking Sector | TSKB P a g e | 8
Summary of 1Q’12 results
During 1Q12, TSKB announced net income of TRY 81mn, up +12% QoQ and +22%
YoY, thus beating the consensus estimate by 7%, driven by better than expected
net interest income (6% QoQ). Loan growth in EUR/USD basket terms came in at
4.5% QoQ. The bank managed to sustain its superior asset quality with no NPL
inflows during 1Q12, and its low NPL ratio of 0.4%, precluded the need to set aside
specific provisions.
Unlike the sector trend , TSKB managed to contain cost growth. Opex on a YoY
basis declined by 5% driven by non-HR cost. Accordingly, its cost to income ratio
improved to 14.5% from 18.0% a year ago.
CAR ratio improved by 30bps from a quarter ago to 19.4%, while ROE on a 12M
rolling basis came in at 19.9%, vs. 19.4% in Dec-11 and 18.8% in Mar-11.
Figure 12: 1Q’12 results summary
TSKB Bank-only results summary
Income Statement (TRYm) 1Q11 4Q11 1Q12 QoQ (%) YoY (%)
Gross interest income 124 137 143 4.6 15.5
Interest expense -36 -38 -39 2.1 9.3
Net interest income 88 99 104 6 18
Net fees 3 1 3 89.8 -26.1
Net trading and currency gains 1 -1 3 N/M 165.9
Revenues 93 99 110 10.2 18.1
Cost -17 -20 -16 -21.6 -4.9
Operating income 76 79 94 18.4 23.2
Other income 13 13 9 -29.9 -29.1
Provisions -7 -1 -4 N/M -52.6
Pre tax income 82 91 100 9.3 21.7
Taxes -15 -19 -18 -2.1 20.3
Net income 67 72 81 12.3 22.0
Balance Sheet (TRYm) Mar-11 Dec-11 Mar-12 QoQ (%) YoY (%)
Cash and liquid assets 112 121 175 44.7 56.3
AFS securities 2,130 2,321 2,601 12.1 22.1
HTM securities 308 127 0 N/M N/M
Customer loans 5,110 6,367 6,318 -0.8 23.6
Non performing loans 24 26 26 -0.6 7.9
Total assets 8,329 9,456 9,500 0.5 14.1
Borrow ed funds 5,267 6,779 6,605 -2.6 25.4
Shareholders' funds 1,279 1,366 1,436 5.2 12.3
Selected ratios (%) Mar-11 Dec-11 Mar-12 QoQ (%) YoY (%)
NIM 4.0 4.1 4.2 1.0 3.3
ROA 2.9 2.9 2.9 2.4 -0.1
ROE 18.5 19.4 19.9 2.7 7.8
LDR 97.0 93.9 95.7 1.9 -1.4
Leverage (x) 6.5 6.9 6.6 -4.5 1.6
Cost income 18.0 17.9 14.5 -19.0 -19.5
Fee coverage of cost 20.9 15.2 16.2 6.6 -22.3
Tier-1 CAR 18.1 17.0 17.1 1.0 -5.5
Total CAR 21.0 19.1 19.4 1.9 -7.5
NPL 0.5 0.4 0.4 0.1 -12.7
Cost of risk 0.6 0.1 0.2 N/M -63.0
Source: Company data, Seker estimates
10. 19 July 2012
Banking Sector | TSKB P a g e | 9
Valuation and Estimates
We use the residual earnings (RE) methodology to value TSKB and other banks
within our coverage when setting target prices. RE methodology can be viewed as
a dividend discount model. Residual earnings are the return on common equity,
expressed as a TL return, rather than a ratio. For each earnings period we restate
residual earnings as Residual Earnings = (Return on Equity – Cost of Equity)*BV per
share.
We rate the stock “Outperform” with a 12M target price of TRY2.42. There are
several reasons behind our recommendation (in order or importance):
1. We like TSKBs superior asset quality compared to sector,
2. Turkish Treasury guarantee ensures the bank has no funding constraints in
tighter liquidity periods, and the ability to borrow long term and low cost,
hence higher spreads,
3. We believe that the shift away from energy sector lending to
infrastructure is an upside risk to our loan growth estimate, as there are
several incomplete infrastructure privatisation deals in the pipeline,
4. TSKB has been one of the highest ROE earners of the banking sector.
Between 2005 and 2011 TSKB managed to deliver its investors an average
ROE of 19.3%. We estimate the bank delivering average 19.5% ROE in our
forecast period of 2012-2014F.
Figure 13: Target Price Model
Figure 14: TSKB bank only forecasts and ratios
Source: Company data, Seker estimates
Year to Dec 2007 2008 2009 2010 2011 2012F 2013F 2014F
Loans (TLm) 2,554 3,668 3,820 4,773 6,367 7,395 8,726 10,297
Revenue (TLm) 146 220 264 307 363 417 455 527
NII (TLm) 137 244 255 298 364 415 445 516
Net income (TLm) 147 119 175 212 255 299 327 378
BVPS (TL) 0.67 0.68 0.95 1.15 1.24 1.43 1.67 1.94
EPS (TL) 0.13 0.11 0.16 0.19 0.23 0.27 0.30 0.34
PER (x) 13.7 17.0 11.6 9.6 7.9 6.8 6.2 5.4
Yield (%) 0.00 0.00 1.48 1.56 1.88 2.27 2.66 2.90
PBR (x) 2.74 2.70 1.94 1.60 1.48 1.29 1.10 0.95
ROE (%) 22.2 16.0 18.7 18.0 19.4 20.3 19.2 19.0
TSKB Target Price assumption- Residual Earnings Estimate
2008 2009 2010 2011 2012F 2013F 2014F
EPS 0.11 0.16 0.19 0.23 0.27 0.30 0.34
DPS 0.04 0.02 0.03 0.04 0.05 0.05 0.06
BVPS 0.68 0.95 1.15 1.24 1.43 1.67 1.94
ROE 0.16 0.19 0.18 0.19 0.20 0.19 0.19
Cost of Equity 0.13 0.13 0.13 0.13 0.13 0.13 0.13
Growth in RE 0.47 0.21 0.21 0.17 0.09 0.09
13.3 % on RE 0.02 0.04 0.04 0.07 0.09 0.08 0.10
Present Value of RE 0.02 0.04 0.04 0.07 0.09 0.08 0.10
Total PV of RE 0.48
Continuing value (CV) 1.08
Present Value of CV 0.51
Target Price (TRY) 2.42
11. 19 July 2012
Banking Sector | TSKB P a g e | 10
TSKB Investor Multiples in Context
Figure 15: PBR (x) 2012F and 2013F
Figure 16: PER (x) 2012F and 2013F
Source: Company data, Seker estimates
Source: Company data, Seker estimates
1.65
1.47
1.36
1.29 1.27
1.15
1.07
0.90
1.37
1.28
1.20
1.10 1.11
1.00 0.97
0.82
0.00
0.20
0.40
0.60
0.80
1.00
1.20
1.40
1.60
1.80
Halkbank Garanti Akbank TSKB Industry Yapi Kredi Isbank Vakifbank
2012F 2013F
10.1
9.0
8.6
8.3
7.9 7.7 7.6
6.8
8.5
7.7 7.5
7.1
6.5 6.7 6.7
6.2
0.0
2.0
4.0
6.0
8.0
10.0
12.0
Akbank Garanti Isbank Industry Vakifbank Yapi Kredi Halkbank TSKB
2012F 2013F
12. 19 July 2012
Banking Sector | TSKB P a g e | 11
Company Profile
A bank on a “mission”
TSKB is Turkey’s only listed corporate and development bank, as well as its first
private investment and development institution. The bank was established in 1950
with World Bank assistance (its first CEO was also a World Bank veteran) along with
the collaboration of the Turkish Government, Central Bank of Turkey (CBT) and
leading domestic commercial banks.
The aim of the bank as a Turkish industrial development entity is to assist
enterprises across all sectors with special attention to industry. The bank also
facilitates domestic and international investment in local companies. As well as
providing financial support to companies, TSKB offers consultation, technical
support and sector expertise.
TSKB is the 16th
largest bank by asset size as of Mar’12. The banks’ headquarters is
located in Istanbul and it has only three other branches, in Ankara, Izmir, and
Bahrain (which is in the process of closing down). As of the end of 1Q12 TSKB
employs 347 personnel. The bank does not collect deposits, but funds itself via long-
term borrowings from multinational corporations.
Isbank Group companies own 50% of TSKB, while 8% is owned by Vakifbank and the
remaining 42% is traded on the ISE. Isbank has 8 members on TSKB’s board, while
Vakifbank is represented with one board member.
Figure 17: Ownership structure
Isbank
50%Free Float
42%
Vakifbank
8%
Detailed ownership %
Isbank 40.52%
Camis Yatırım Holding 5.80%
Milli Reasurans 1.90%
Anadolu Hayat Emeklilik 0.89%
Anadolu Sigorta 0.89%
Isbank Group 50.00%
Vakifbank 8.38%
Istanbul Ticaret Odası 0.52%
Istanbul Ticaret Borsası 0.21%
Istanbul Sanayii Odası 0.12%
Other 2.89%
Free Float 37.88%
TOTAL 100.00%
Source: Company data
