Cap on overdraft rates
affects full-year pre-tax income by 4.3%
The Central Bank of Turkey (CBT) put a cap on the interest rate of overdraft accounts, linking it to the credit card monthly interest rate of 2.2%. Although overdraft accounts comprise only 1.1% of the total loan book of the banks that we cover, we expect the negative impact on annualised income to be 4.3%.
Volume gains insufficient to offset rate cap impact
The annual interest rate on overdraft accounts is likely to drop by a sizeable 17ppt to 26%, shaving around TRY1.3b in interest income from the banks that we cover. Volume gains are not expected to be sufficient to offset the negative impact. Moreover, the cap is set to be further reduced by the CBT in tandem with the reduction in credit card interest rates.
Vakifbank to be the most negatively affected
We have cut the monthly interest rate from an estimated 3.6%, which we obtained through channel checks, to 2.2%. While some banks used to charge lower rates for individuals, they tend to charge more to corporates, bringing the starting point to the same level for almost all the banks across the board. Accordingly the cap is expected to lower the interest income on these loans by around 40% ceteris paribus, and the negative impact on annualized income is expected to be around 4.3%. The regulatory pressure and the government’s willingness to pull down lending rates has become more evident with this move, which indicates further pressure on loan interest rates in the coming periods leading to further L/D spread pressure. Of our coverage, Vakifbank is expected to be affected the most negatively. The share of overdraft accounts in total loans is 1.9% for Vakifbank (1.1% for our coverage). Therefore while we cut our earnings estimates by 4% in total for 2013-2017, we cut it by 9% for Vakifbank. These changes have also resulted in an around 4% cut in our TPs. We cut Vakifbank’s TP to TRY7.30 from TRY8.10 and downgrade it to HOLD given limited upside and due to its 24% outperformance against the banking index since YE12. Although we still like the prudent management and the transformation story of Vakifbank, we think the recent move by the CBT will pressure the share price. We also remove Vakifbank from our top-picks.
The Central Bank of Turkey (CBT) put a cap on the interest rate of overdraft accounts, linking it to the credit card monthly interest rate of 2.2%. Although overdraft accounts comprise only 1.1% of the total loan book of the banks that we cover, we expect the negative impact on annualised income to be 4.3%.
Volume gains insufficient to offset rate cap impact
The annual interest rate on overdraft accounts is likely to drop by a sizeable 17ppt to 26%, shaving around TRY1.3b in interest income from the banks that we cover. Volume gains are not expected to be sufficient to offset the negative impact. Moreover, the cap is set to be further reduced by the CBT in tandem with the reduction in credit card interest rates.
Vakifbank to be the most negatively affected
We have cut the monthly interest rate from an estimated 3.6%, which we obtained through channel checks, to 2.2%. While some banks used to charge lower rates for individuals, they tend to charge more to corporates, bringing the starting point to the same level for almost all the banks across the board. Accordingly the cap is expected to lower the interest income on these loans by around 40% ceteris paribus, and the negative impact on annualized income is expected to be around 4.3%. The regulatory pressure and the government’s willingness to pull down lending rates has become more evident with this move, which indicates further pressure on loan interest rates in the coming periods leading to further L/D spread pressure. Of our coverage, Vakifbank is expected to be affected the most negatively. The share of overdraft accounts in total loans is 1.9% for Vakifbank (1.1% for our coverage). Therefore while we cut our earnings estimates by 4% in total for 2013-2017, we cut it by 9% for Vakifbank. These changes have also resulted in an around 4% cut in our TPs. We cut Vakifbank’s TP to TRY7.30 from TRY8.10 and downgrade it to HOLD given limited upside and due to its 24% outperformance against the banking index since YE12. Although we still like the prudent management and the transformation story of Vakifbank, we think the recent move by the CBT will pressure the share price. We also remove Vakifbank from our top-picks.
teb ytr
Hiç yorum yok:
Yorum Gönder