BANK ASYA Report - 03/08/2012

NPL ageing to put pressure on earnings in 2H12…

·         Bank Asya reported TL54mn earnings in its 2Q12 BRSA bank-only financials, indicating a quarterly RoAE of 9.8%. The results came slightly above both our estimate and the consensus estimate of TL51mn. The deviation between our estimate and the actual results stemmed mainly from the higher than expected fee income line.

·         The highlights of the quarter can be summarized as: i) 33Bps QoQ improvement in NIM thanks to the widening TL loan-deposit spreads with the continued upward repricing in loan yields and QoQ flat deposit costs. Cost of TL time deposits increased by 29bps QoQ to 8.9% due to the increased profit sharing ratios and QoQ lower loan loss provisions recorded in 2Q12. FX time deposits decreased by 17bps QoQ to 4.1%, yet still well above the sector, which explains the 10% QoQ growth in FX deposits in 2Q12. ii) loan to deposit ratio increased by 2pps to 109% thanks to the above sector growth in TL loans iii) market share

gains in loans was driven mainly by the growth in commercial installment, housing and credit card loans. iv) NPL ratio eased by 29bps to 4.0%, as the bank again wrote off TL33mn NPLs in the quarter, otherwise NPL ratio would have improved by 9bps QoQ. NPL additions and NPL collections grew by 3% and 37% QoQ respectively, while NPL collections covered 59% of the NPL additions in the quarter. NPL provisioning coverage increased by 1pp to 55% in 2Q12 due mainly to ageing of NPLs. v) CAR narrowed by 18bps QoQ to 13.47% as the continued shift from non-cash loans to cash loans lost some pace. vi) fees were up by 4% QoQ and opex grew by 14% QoQ in 2Q12 as the bank opened 20 branches and hired 85 employees in one quarter. vii) following the sharp rise in 1Q12, provision expenses normalized in 2Q12, contracting by 11% QoQ.

·         All in all, the improvement in Bank Asya’s NIM continued in 2Q12 as well. The bank aims to increase its NPL provisioning coverage to 65% by 3Q12-end, which implies that its TL deposit costs will remain low and its asset growth will be funded through FX deposit growth in the following quarters.