Garanti Bank (GARAN)
posted TRY1,004mn NI (up by 17% and 33%, YoY and QoQ, respectively) in the
first quarter of the year, beating both the consensus and our estimate of
TRY931mn and TRY879mn, respectively. Higher than expected NI mainly stemmed
from an almost 2x higher than expected trading gain, better than envisaged fee
generation (up by 29% and 32%, YoY and QoQ) and release of TRY55mn free
provisions.
Income Statement
highlights... Quarterly
NIM evolution was somewhat different than we had anticipated as we have been
expecting both higher interest & expenses for the quarter, while a 4.60%
quarterly NIM was slightly higher than our estimate of 4.50%. Therefore, the 3%
contraction in quarterly NII of TRY1,803mn was slightly better than our 6%
contraction expectation. We have been surprised to see an LC deposit cost
decline of 85bps even with QoQ customer deposit growth of 5% and almost a flat
demand deposit ratio at 20%. Contrary to its peers (both Halkbank – down by
6bps and Akbank – down by 1bps, the banks that announced its 1Q13 financial
results so far) the bank managed to increase its LC core spread by 15bps, while
the securities yield contracted by 165bps due to lower CPI readings (CPI
linkers return was down by more than 10% QoQ).
Balance Sheet highlights…
Owing to higher
deposits and fresh issued securities of TRY1.25bn (TRY750mn Eurolira + bank
bill rollovers with higher rollover ratios) the bank decreased its MM
dependency by more than 15%. Another differentiation from the sector concerned
the components of loan growth. Despite tough competition, Garanti chose to grow
in LC corporate loans. Apart from that, and in line with the sector trend,
mortgages and GPLs were also up by 7% and 8%, respectively, both helping to
deliver a sustainable spread. All in all, loan growth was in line with the
sector at 5%, mainly driven by LC loan growth of 6.5%, while FX loan growth was
relatively slow at 3%, yet somewhat better than the sector growth of 1.4%. Non
FI - LDR was up to 111%, vs. 109% of 2012YE.
The bank shifted a USD250mn Eurobond
to AFS from the HTM portfolio as well as increasing its CPI linkers share,
shaping the portfolio for upcoming redemptions in 3Q13. Thus, the sec/assets
ratio was almost flat at 24% while the bank was able to book a quarterly trading
gain of TRY141mn, vs. our expectation of TRY75mn. There is still a TRY1.0bn
unrealized gain under the book, as a roughly TRY200mn gain was realized during
the quarter. Another positive surprise was in the other operating income as the
bank released TRY55mn free provisions, inching up the other operating income to
TRY146mn as the main contributor - collections realized in line with our
estimate at TRY74mn.
Even with 700 new staff and 10
branch openings during the quarter, OPEX was remarkably under control as annual
increase was only at 8%, vs. our estimate of 11%. Additionally, fee generation
was also sensational as the bank managed to increase its fees by almost 30%,
YoY. Even though we have been anticipating a better fee evolution due to
accruals of last year’s formations, almost a 1/3x increase was much higher than
our estimate as the bank changed its accounting policy for a more favorable one
(the one that the peers such as Halkbank and Isbank have been using since last
year). The change stands to result in an upward revision to our fee growth
estimate. The quarterly Fee/OPEX ratio was more than 10ppt higher, YoY at 74%,
whilst CIR was down to 32% from 41% in the same period of last year.
On the asset quality front, we can
say that the bank managed well the valid NPL flow of TRY333mn by reversing more
than 1/2x in the same period. Thus, the NPL ratio was only up 5bps to 2.3%,
while the coverage ratio was flat at 81%. Loan specific COR was in line with
our estimate at 85bps, while blended COR was up QoQ to 222bps increasing by
24bps due to TRY210mn one-off provisions (TRY160mn CB fine + TRY50mn tax fine).
Quarterly ROE improved to 18.5%, vs.
14.6% of 4Q12, while rolling ROE remained flat at 15.9%. CAR was slightly down
to 18.1%, while Tier-1 is at 16.4%, vs. the 16.6% of 2012YE.
|
Şeker Invest Research |
Revisions… Garanti managed to bring about the
best operational quarter ever by recording a quarterly-adjusted operating
income of TRY1,800mn. It should in fact prove to be the highest quarterly
operating income figure in Turkish Banking history. We more than welcome the
results, and thus have revised upwards our estimates for the bank. Our revised
FY NI estimate is now pointing at EPS growth of 14%, vs. the previous
11%. And in line with the revision to estimates, we have raised our TP by
10% to TRY12.10, which indicates an upside potential of 26% for the bank. We
reiterate our OUTPERFORM rating for the bank.
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