Earnings below our estimate
despite stronger top line
TSKB reported TRY68m bank-only net profit in 4Q12 (flattish q-q but -6% y-y) resulting in 16.0% quarterly ROE. FY12 net profit was TRY307m (+20% y-y, yielding 20% annual ROE). The reason that results were below our estimate of TRY74m (market consensus: TRY75m) was mainly the higher-than-anticipated provisioning expenses.
Earnings forecasts broadly unchanged, NIM contraction ahead
The main point is the NIM contraction in 2013. The downward trend in security portfolio yields (-100bp y-y) and the diminishing loan spread
(-20bp y-y) are likely to shave off around 30bp y-y, resulting in 4.2% NIM. As we had been projecting these already, we have made tiny changes to our earnings forecasts, leaving 2013 and 2014 almost unchanged.
Transferring coverage and changing valuation basis
We transfer our coverage, and change our valuation method to Gordon Growth and Excess Equity Return, which produces a TP of TRY2.73 for TSKB. We reiterate our BUY in the stock on favourable expected 2013 P/E of 8.1x, P/BV of 1.3x and ROE of 17%. These valuation metrics look fairly attractive to us, and offset the weak earnings outlook in 2013.
TSKB reported TRY68m bank-only net profit in 4Q12 (flattish q-q but -6% y-y) resulting in 16.0% quarterly ROE. FY12 net profit was TRY307m (+20% y-y, yielding 20% annual ROE). The reason that results were below our estimate of TRY74m (market consensus: TRY75m) was mainly the higher-than-anticipated provisioning expenses.
Earnings forecasts broadly unchanged, NIM contraction ahead
The main point is the NIM contraction in 2013. The downward trend in security portfolio yields (-100bp y-y) and the diminishing loan spread
(-20bp y-y) are likely to shave off around 30bp y-y, resulting in 4.2% NIM. As we had been projecting these already, we have made tiny changes to our earnings forecasts, leaving 2013 and 2014 almost unchanged.
Transferring coverage and changing valuation basis
We transfer our coverage, and change our valuation method to Gordon Growth and Excess Equity Return, which produces a TP of TRY2.73 for TSKB. We reiterate our BUY in the stock on favourable expected 2013 P/E of 8.1x, P/BV of 1.3x and ROE of 17%. These valuation metrics look fairly attractive to us, and offset the weak earnings outlook in 2013.
NIM down 30bp y-y in FY13 and tolerable NPL inflow in 1Q13
Constituting 5.7% of total IEA, the 310bp real return and the seasonally high inflation boosted the NII in 4Q12 (NIM up by 40bp q-q), while loan yield diminished by 20bp q-q, to 5.1%. TSKB guides for 30bp y-y NIM in FY13, in line with our projection. As 57% of the NII is composed of interest income on bonds, the fall in bond rates will hurt NII growth, which we project at 4% y-y. Despite the 15% y-y FX-adjusted loan growth in 2013 (13.8% y-y in FY12) and the pickup in corporate banking activity, we see limited contribution from NFI. TSKB also guided for a possible partial NPL inflow in 1Q13, which may result in a tiny 15bp cost-of-risk ratio in FY13. TSKB guides for an at-least-20% payout ratio, implying a 2.4% yield.
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