Profit estimates and target
price revised up
We increase our net profit forecast for 2012 by 7% and 2013 by 12%, driven mainly by higher net interest income and lower provision estimates. We also raise our DDM-based target price by 17% to TRY1.82/share from TRY1.56/share, on higher medium-term profitability assumptions.
3Q12 net profit beats estimates on stronger than forecast NII
Al Baraka reported TRY63m net profit in 3Q12, 27% above our TRY50m estimate and 28% higher than CNBC-e consensus, for a 22% ROE. Stronger than expected NII on proceeds from JV projects caused the beat while lower than forecast provisions were partly offset by lower other operating income. Other P&L items were in-line with our estimates.
Reiterate BUY on attractive valuation with healthy upside to TP
The bank is trading at the lowest P/E multiples among our Turkish banks coverage which we think is undeserved. Key downside risk to our call is a substantial contraction in economic activity with increasing unemployment, and particularly problems in the construction sector which would hit the bank harder than peers.
Risks are to the upside on our 17% ROE estimate for FY13
Growth was in line with our expectations as loans and deposits grew 3% and 5%, respectively q-q. Meanwhile, adjusted NIM came in 50bp higher than our expectation at 5.2%, with the deviation primarily stemming from higher-than-expected proceeds from JV projects. We think these could represent continued upside to our net profit estimates for the next couple of years. Slight pick-up in NPL inflows caused a 9bp rise in the NPL ratio to 2.2% where the asset quality deterioration remained below sector averages. Still, due to lower collections net CoR increased to 35bp, just above our 27bp forecast. CAR improved to 12.5% after Basel-II where sukuk investments in 4Q12 could further alleviate the pressure.
We increase our net profit forecast for 2012 by 7% and 2013 by 12%, driven mainly by higher net interest income and lower provision estimates. We also raise our DDM-based target price by 17% to TRY1.82/share from TRY1.56/share, on higher medium-term profitability assumptions.
3Q12 net profit beats estimates on stronger than forecast NII
Al Baraka reported TRY63m net profit in 3Q12, 27% above our TRY50m estimate and 28% higher than CNBC-e consensus, for a 22% ROE. Stronger than expected NII on proceeds from JV projects caused the beat while lower than forecast provisions were partly offset by lower other operating income. Other P&L items were in-line with our estimates.
Reiterate BUY on attractive valuation with healthy upside to TP
The bank is trading at the lowest P/E multiples among our Turkish banks coverage which we think is undeserved. Key downside risk to our call is a substantial contraction in economic activity with increasing unemployment, and particularly problems in the construction sector which would hit the bank harder than peers.
Risks are to the upside on our 17% ROE estimate for FY13
Growth was in line with our expectations as loans and deposits grew 3% and 5%, respectively q-q. Meanwhile, adjusted NIM came in 50bp higher than our expectation at 5.2%, with the deviation primarily stemming from higher-than-expected proceeds from JV projects. We think these could represent continued upside to our net profit estimates for the next couple of years. Slight pick-up in NPL inflows caused a 9bp rise in the NPL ratio to 2.2% where the asset quality deterioration remained below sector averages. Still, due to lower collections net CoR increased to 35bp, just above our 27bp forecast. CAR improved to 12.5% after Basel-II where sukuk investments in 4Q12 could further alleviate the pressure.
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