Beats our estimate on the
back of strong trading income…
Halkbank posted TRY742m bank-only net profit in 4Q12 (+24% q-q and +47% y-y), higher than our expectation on higher-than-expected trading gains. FY12 net profit was TRY2,595m, 27% y-y growth and 24.8% ROE. The bank has compensated for higher provisions and opex via a massive TRY310m trading line. NII and NFI were in line with our expectations.
…however, we should have eye on possible NPL inflow
The restructured loans of around TRY900m signal some NPL inflow in 1Q13 although the TRY91m net NPL addition in 4Q12 is better than the TRY137m in 3Q12. Share of closely-monitored loans leapt from 2.9% to 4.7% q-q. Therefore, we have pencilled in a 64bp cost-of-risk ratio in FY13, while assuming the NPL ratio will remain at 3.0%.
Transferring coverage and changing valuation basis
We transfer our coverage, and change our valuation method to Gordon Growth and Excess Equity Return, which produce a TP of TRY18.72 for Halkbank. We reiterate HOLD due to EPS contraction of 3.9% y-y in FY13 and diminishing ROE to 19.1%. Valuation metrics seem less attractive to us, given the anticipated weaker earnings performance.
Halkbank posted TRY742m bank-only net profit in 4Q12 (+24% q-q and +47% y-y), higher than our expectation on higher-than-expected trading gains. FY12 net profit was TRY2,595m, 27% y-y growth and 24.8% ROE. The bank has compensated for higher provisions and opex via a massive TRY310m trading line. NII and NFI were in line with our expectations.
…however, we should have eye on possible NPL inflow
The restructured loans of around TRY900m signal some NPL inflow in 1Q13 although the TRY91m net NPL addition in 4Q12 is better than the TRY137m in 3Q12. Share of closely-monitored loans leapt from 2.9% to 4.7% q-q. Therefore, we have pencilled in a 64bp cost-of-risk ratio in FY13, while assuming the NPL ratio will remain at 3.0%.
Transferring coverage and changing valuation basis
We transfer our coverage, and change our valuation method to Gordon Growth and Excess Equity Return, which produce a TP of TRY18.72 for Halkbank. We reiterate HOLD due to EPS contraction of 3.9% y-y in FY13 and diminishing ROE to 19.1%. Valuation metrics seem less attractive to us, given the anticipated weaker earnings performance.
Restructured loans make us cautious
Positives include stronger-than-sector loan growth (+4.6% q-q), mostly from housing and corporate, 30bp q-q core spread improvement on falling cost-of-deposits, 115bp q-q NIM jump mainly from positive CPI linker contribution, and loan-deposit ratio sustained at 82% on 4.6% q-q deposit growth. Negatives to mention include an opex jump of 34% y-y in 4Q12, attributable to the launch of the new credit card scheme and TRY900m in restructured loans, signalling some NPL inflow in 1Q13 (restructured loans/performing loans climbed to 2.6% from 1.3% in 3Q12). All in all, despite a higher-than-expected bottom line, the possible NPL inflow makes us cautious about FY13 earnings so we retain our HOLD
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