Turkish banks had a good
start to 2013, with 37% y-y growth in January. The net income figure stood 17%
above the monthly average in 4Q12, mainly on the back of 1) lower provisioning
expenses, 2) higher other operating income, and 3) stronger net fee income.
Despite the 20bp NIM contraction in January compared with 4Q12, due to a lower
security portfolio yield, both TL and FX loan/deposit spreads remained almost
unchanged.
Public banks achieved higher earnings growth than private deposit banks in January when compared with the 4Q12 monthly average, mainly due to a stronger performance in other operating income. Participation banks performed well on the core banking side, but higher provisioning expenses, which doubled compared with the monthly average in 4Q12, prevented a better result in the bottom line.
250bp m-m drop in TL security portfolio yield pulled down the NIM, despite core spread remaining strong. The drop in CPI linkers yield and the faster re-pricing of the security portfolio book resulted in 250bp m-m drop in security portfolio yield in January (down 100bp from the 4Q12 monthly average). We expect inflation to come down further, narrowing the CPI linker yield for FY13. The expected downward re-pricing of the security portfolio (due to acceleration in Turkish Treasury redemptions in March-June 2013E) should become more evident, pressurising the security portfolio yield.
14% growth in net fee income in January 2013 compared with the 4Q12 monthly average suggests to us that 1) the negative impact of the accounting change has come to an end, and 2) faster loan growth in lucrative segments contributed positively to net fee income generation. Operational expense growth remained muted in January over the monthly average of 4Q12, which indicates an improvement in the NFI/Opex ratio. Although it is too early to make a concrete comment, we see a strong likelihood of an improved NFI/Opex ratio in FY13, given that banks will have strict control over opex (to grow by slightly above inflation) while NFI should grow by mid-teens.
Unlike in the previous month, marked-to-market gains had no contribution to growth in shareholders’ equity, as the interest rate remained almost unchanged in January 2013 compared with the end of December 2012. As such the capital adequacy ratio sustained its level at 17.8%, which was strong enough to fund growth in the sector.
Public banks achieved higher earnings growth than private deposit banks in January when compared with the 4Q12 monthly average, mainly due to a stronger performance in other operating income. Participation banks performed well on the core banking side, but higher provisioning expenses, which doubled compared with the monthly average in 4Q12, prevented a better result in the bottom line.
250bp m-m drop in TL security portfolio yield pulled down the NIM, despite core spread remaining strong. The drop in CPI linkers yield and the faster re-pricing of the security portfolio book resulted in 250bp m-m drop in security portfolio yield in January (down 100bp from the 4Q12 monthly average). We expect inflation to come down further, narrowing the CPI linker yield for FY13. The expected downward re-pricing of the security portfolio (due to acceleration in Turkish Treasury redemptions in March-June 2013E) should become more evident, pressurising the security portfolio yield.
14% growth in net fee income in January 2013 compared with the 4Q12 monthly average suggests to us that 1) the negative impact of the accounting change has come to an end, and 2) faster loan growth in lucrative segments contributed positively to net fee income generation. Operational expense growth remained muted in January over the monthly average of 4Q12, which indicates an improvement in the NFI/Opex ratio. Although it is too early to make a concrete comment, we see a strong likelihood of an improved NFI/Opex ratio in FY13, given that banks will have strict control over opex (to grow by slightly above inflation) while NFI should grow by mid-teens.
Unlike in the previous month, marked-to-market gains had no contribution to growth in shareholders’ equity, as the interest rate remained almost unchanged in January 2013 compared with the end of December 2012. As such the capital adequacy ratio sustained its level at 17.8%, which was strong enough to fund growth in the sector.
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