YKBNK’s (BUY, TP TRY4.05) net profit of TRY352m missed our TRY386m and
consensus’ TRY399m estimates on higher general provisioning (TRY150m in 2Q vs.
TRY47m in 1Q) and effective tax rate (26%) as well as a TRY22m one-off (pension
deficit) in opex. Indeed, net operating profit beat our estimate by 4% on
better-than-expected spreads (+72bp q-q) and adj. NIM (+40bp q-q). We forecast
YKB to have one of the best earnings sustainabilities for 2H12 as well as in
2013 in the banking sector on easing deposit and swap costs, relatively lower
negative impact from decreasing CPI-linker and FRN security yields, and normalising
level of general provisions.
The key downside risk to our call is a sudden
slowdown in the economy with rising unemployment figures pushing SME and
credit-card NPL ratios higher. The main upside risk to our estimates is
better-than-expected L-D spread evolution. The management guides that the cost
of blended TRY deposit cost is already down 20-30bp q-t-d vs. stable loan
yields which is persisted should allow for some spread expansion in 2H as well.
Loans and deposits grew 5% and 8%, respectively, in-line with expectations
while L-D spread rose 72bp q-q as TRY and FX spreads expanded 34bp and 104bp,
respectively. Despite higher swap costs, adj. NIM increased by 40bp. The NPL
ratio deteriorated by 10bp while the specific CoR remained stable at 78bp. Asset
quality is the soft spot of the bank where the management plans to take some
measures in order to improve collection performance. General provisions rose
sharply where out of the total TRY150m approximately TRY75m was related to loan
growth, TRY50m to interbank placements, and TRY25m to restructured loans.
Fees
contracted 4% y-y, better than the 8% drop in 1Q where adj. growth stood at 18%
y-y in 2Q while costs grew 11% y-y adj. for one-offs similar to 1Q trend.
Shareholders’ equity rose by an additional TRY1.3b as the bank started to book
its subsidiaries at market value rather than the previous practice of restated
cost. This boosts CAR by 38bp while sale of YK insurance could add another 70bp
to CAR which stands at 14.5%. Amortisations of subdebts hit 2Qs the worst for
the bank but we expect an improving trend in future quarters. Management raised
NIM guidance to +20-30bp y-y for FY12 vs. flat previously. 17% and 16% loan and
deposit growth, 10% opex increase, 30-40bp NPL ratio deterioration, and <100bp
CoR guidances are maintained. Trading @ 1.2x & 8.6x 2012 P/TB & P/E
resp. w/ 2012 ROTE @ 15.2%.
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