TURKISHBANKSBAROMETERABALANCEOFRISINGLDSPREADANDASSETQUALITYDETERIORATIONINAUGUST1011

1、analystcommercial banksturkeyabcglobal researchturkish banksbarometera balance of rising l/d spread and assetquality deterioration in augusttamer sengun*hsbc yatrm menkul deerler a.+ 90 212 376 .trharish paliwal*associate, bangaloreview hsbc global research at http:/*employed by a non-us affiliate o

2、f hsbc securities (usa) inc,and is not registered/qualified pursuant to finra regulations loan-deposit spread expansion drivesnim and revenues on y-o-y basis butasset-liability spread compressionsqueezes nim sequentially domestic private banks earningsrecovers but state owned banks dragsequential ea

3、rnings net income grows by 19% y-t-d attry15.2bn till august 12expansion in loan deposit spread drives turkishbanks net income growth on a y-o-y basis. according tothe brsas latest banking sector aggregate data (releasedon 8 october 2012), the sectors net income more thandoubled on a y-o-y basis to

4、try1.78bn in august 2012from try758mn in august 2011. on a y-t-d comparison(jan-aug 2012) net income rose by 19.4% y-o-y for thesector to try15.2bn while on a q-t-d comparison (jun-aug 2012) net income grew by 51% y-o-y. total bankingrevenues rose by 40% y-o-y to try5.8bn in august drivenby an 82% i

5、ncrease in adjusted net interest income (nii).was attributable to a 128bps decline in securities yield dueto lower yields on cpi-linkers. adjusted nim rose by1.65ppt y-o-y to 4.16% supported by a trading gain oftry46mn in august 2012 compared with a loss oftry338mn in august 2011.asset quality deter

6、ioration continued. gross nplsincreased by 3.8% m-o-m in august, versus 9.5% rise inthe first seven months of the year. cor stood at 100bps inaugust, versus 70bps in july, despite a lower coverageratio at 76.7% versus 77.2% in july. if the coverage ratiowere to be maintained at 77.2% cor would have

7、been116bps. other banking income (mainly npl recoveries)down by 43% y-o-y and 32% m-o-m, while the specificprovisions up by 103% y-o-y and 45% m-o-m.owing to a low base, domestic private banks y-t-dearnings growth turned to positive in august. since thebeginning of the year, domestic private banks (

8、dpb) y-t-dearnings showed a contraction on a y-o-y basis. however,owing to the base affect, august net income of dpbs wasup by c300%, resulting in a growth of 10% y-o-y in jan-aug 2012 period. state owned banks earnings are up by21% y-o-y for the same period.banking sector will likely show a y-o-y a

9、nd q-o-qissuer of report:hsbc yatirim menkul degerler a.s.nim propelled on a y-o-y basis by higher loan toearnings growth in q3 2012. the announced banking9 october 2012disclaimer & disclosuresthis report must be read with thedisclosures and the analyst certificationsin the disclosure appendix,

10、and with thedisclaimer, which forms part of itdeposit spread but drop in asset-liability spread affectssequential growth. nim for the sector was up 124bp y-o-y but down 14bp m-o-m at 4.11% in august. the y-o-yexpansion was mainly owing to a 1ppt expansion in loan-deposit spread leading to a 1.1ppt e

11、xpansion in asset-liability spread. however, the drop in nim sequentiallysector data show that the revenue performance of thebanking sector was strong and offset the negative impact ofthe asset quality deterioration. we believe the revenueswill be much stronger in september and the bankingsector wil

12、l likely show a y-o-y and q-o-q earnings growthin q3 2012.234567891112commercial banksturkey9 october 2012contentsratings and macro forecastsmargin and growth (q2 2012)npl and provisions (q2 2012)return and capital (q2 2012)economic indicatorsnet interest margin (nim) improvement in l/dspread contin

13、ues, yet cpi-linkers put pressureasset quality signs of deterioration, npl ratiocontinues to rise, coverage continues to fallsector earnings sequential earnings growth weaksummary aggregate sector income statement(trym)balance sheet developmentslatest sector volume data (02 october 2012)disclosure a

14、ppendixdisclaimer101315abc12commercial banksturkey9 october 2012ratings and macro forecastsrating summary (try)abcbankprice _eps _ _ tbvps _ _ pe _ _ p/bv _roe _ratingric2012e2013e2012e2013e2012e2013e2012e2013e2012e2013eakbankalbarakabank asyagarantihalkbankisbankvakifbankyapi kredi7.721.361.997.861

15、4.605.703.774.310.602.000.710.520.430.810.220.290.842.220.740.610.605.141.302.584.869.254.684.363.445.821.522.865.5611.075.374.924.0412.057.329.8211.307.287.987.2610.129.486.226.979.416.597.601.040.771.621.581.220.861.251.330.890.701.411.321.060.771.0713.5%15.4%8.2%15.4%24.8%

16、16.5%12.8%13.9%14.9%15.5%10.5%16.0%21.8%14.8%13.2%15.9%own(v)n(v)nnownn(v)7.721.361.997.8614.605.703.774.31source: company data, hsbc estimates, priced at close on 05 october 2012macroeconomic outlooklending growth rate for the turkish banking sector (y-o-y %)20112012e2013emortgageautogeneralpurpose

17、credit card total retail non-retail tlloansgdp growth (%)cpi, average (%)9.03.87.3200720082009201020112012e39%20%15%35%23%15%-8%-11%-20%28%30%9%67%32%14%42%38%21%26%25%8%19%27%29%37%23%11%33%30%21%30%19%9%33%24%24%industrial production (%)exports (%)imports (%)consumer spending (%)current a

18、ccount (% gdp)budget balance (% gdp)9.26.510.67.7-10.0-1.42.813.60.00.0-7.6-2.25.5-7.1-1.5source: brsa for historical data, hsbc estimatessource: hsbc estimates3commercial banksturkey9 october 2012margin and growth (q2 2012)net interest margin (%)loan growth (% y-o-y)abcq2 2011q3 2011q4 20

19、11q1 2012q2 2012q2 2011q3 2011q4 2011q1 2012q2 2012akbankalbarakabank asyagarantihalkbankisbankvakifbankyapi kredi3.0%4.5%4.3%3.4%4.1%3.3%3.4%3.5%3.0%4.8%4.8%3.0%4.0%3.0%3.5%3.4%3.6%5.0%3.9%4.4%5.1%3.5%3.8%3.9%3.5%4.5%4.6%3.8%4.7%3.5%3.8%3.7%3.5%4.7%4.8%3.9%5.1%3.8%4.0%4.2%akbankalbarakabank asyagar

20、antihalkbankisbankvakifbankyapi kredi37%27%25%34%35%35%34%35%41%24%35%35%35%46%33%42%33%16%20%29%27%43%28%29%27%20%21%18%21%32%28%24%24%27%23%17%17%28%18%15%source: company datathe banking sectors nim improved to 4.19% in q2 2012, up 4bps q-o-q. ofthe banks under our turkish coverage, all banks saw

21、their nims expandsequentially with yapi kredi (up 55bps) and halk (up38bps) showing thehighest expansion while akbank (up 9bps) and garanti (up7bps) showed theslowest expansion in nim.in q2 2012, sector net fee and commissions income was ctry3.97bn, up 9%and 7% y-o-y. of the banks under our coverage

22、 halkbank and albaraka postedthe strongest growth in fee and commission income, up 48% and 45%y-o-y, respectively. vakif reported the largest y-o-y decline at 37% followed by a4% decline reported by yapi kredi. please note that the banks apply differentaccounting methodologies regarding the accrual

23、of cash loan related fees andcommissions; isbank and halkbank apply a more earnings friendly approach.fee and commission income growth (% y-o-y)source: company datain q2 2012, the banking sector posted loan growth of 22% y-o-y and 5%q-o-q, while the banks under our coverage posted growth between 15%

24、 and28% y-o-y. among the banks we cover, isbanks loan portfolio grew themost in y-o-y terms (28%), while the loan book of yapi kredi grew the least(at 15%).total banking revenues for q2 2012 increased to try18.6bn, up 3% q-o-qand 26% y-o-y. isbank (up 37% y-o-y) posted the strongest growth in totalb

25、anking revenues, while garanti saw its total banking revenues grew only by11% y-o-y.total revenue growth (% y-o-y)q2 2011q3 2011q4 2011q1 2012q2 2012q2 2011q3 2011q4 2011q1 2012q2 2012akbankalbarakabank asyagarantihalkbankisbankvakifbankyapi kredi26%-3%5%15%33%16%38%11%22%3%9%22%59%24%50%16%21%12%0%

26、-9%46%28%9%16%9%18%-2%-3%2%22%-24%-8%3%45%11%-2%48%18%-37%-4%akbankalbarakabank asyagarantihalkbankisbankvakifbankyapi kredi-14%11%-3%-5%9%-11%1%-9%17%16%14%-2%20%-4%22%-4%-9%28%3%23%48%31%-4%8%-4%22%20%0%18%10%14%-6%16%26%31%11%32%37%12%13%source: company datasource: company datacommercial bankstur

27、key9 october 2012npl and provisions (q2 2012)npl ratio (%)gross npl growth (% y-o-y)abcq2 2011q3 2011q4 2011q1 2012q2 2012q2 2011q3 2011q4 2011q1 2012q2 2012akbankalbarakabank asyagarantihalkbankisbankvakifbankyapi kredi1.81%2.93%3.55%1.94%3.13%2.79%3.89%2.93%1.66%2.92%3.68%1.82%2.90%2.47%3.63%3.02%

28、1.77%2.32%4.57%1.80%2.90%2.12%3.63%3.15%1.72%2.31%4.45%1.89%2.84%2.12%3.50%3.19%1.64%2.15%4.14%1.82%2.80%1.94%3.50%3.29%akbankalbarakabank asyagarantihalkbankisbankvakifbankyapi kredi-13%6%-11%-25%-3%-22%-8%-4%-13%14%1%-25%-5%-23%-10%-3%-1%-10%38%-21%-5%-18%-5%17%5%-1%42%4%-2%-14%0%22%12%-7%43%9%5%-

29、12%5%29%source: company datathe sectors npl ratio fell marginally in q2 2012, declining by 4bp q-o-q to2.66% in june 2012. the npl ratio of the large banks under our coveragedeclined by 7bps q-o-q and was flat q-o-q when adjusted with write offs. thenpl ratios (adjusted with write-offs) declined the

30、 most for isbank (-8bps) andhalkbank (-5bps), while the adj. npl ratios expanded for garanti (+12bps)and yapi kredi (+10bps)cost of risk was at 0.86% in q2 2012, up 3bp q-o-q and 29bp y-o-y. loan-loss provisions in the sector were up 9% q-o-q and 85% y-o-y in q2 2012. inour coverage universe, albara

31、ka had the lowest cost of risk in q2, at 0.32%,while bank asyas cost of risk was highest at 1.64%.loan provisioning/average loans (%)source: company datagross npl for the sector was try20.1bn in june 2012. among our coveragegross npls rose most for bank asya (up 43% y-o-y) and yapi kredi (up 29% y-o

32、-y) while isbank (down 12%) and albaraka (down 7%) saw its npls contractthe most in q2 2012.the sectors npl coverage ratio declined 5.5% y-o-y and remained relativelyflat on a q-o-q basis at 78.8% in june 2012. isbank continues to have a 100% nplcoverage, the highest in our coverage, whereas bank as

33、ya, with 55% (up 1%q-o-q), had the lowest npl coverage in q2 2012 in our coverage.npl coverage (%)q2 2011q3 2011q4 2011q1 2012q2 2012q2 2011q3 2011q4 2011q1 2012q2 2012akbankalbarakabank asyagarantihalkbankisbankvakifbankyapi kredi0.49%1.15%0.83%0.25%0.33%0.52%0.82%0.81%0.28%0.37%1.21%0.33%0.32%0.67

34、%0.59%0.23%0.67%1.27%2.27%0.71%0.55%0.93%0.97%0.87%0.67%0.83%2.32%0.47%0.50%0.74%0.93%0.77%0.71%0.32%1.64%1.01%0.57%0.86%0.77%0.78%akbankalbarakabank asyagarantihalkbankisbankvakifbankyapi kredi100%89%64%82%84%100%100%76%100%89%58%82%84%100%97%71%93%92%50%82%84%100%95%62%93%92%54%81%84%100%96%66%93%

35、92%55%81%84%100%94%67%source: company datasource: company data4commercial banksturkey9 october 2012return and capital (q2 2012)return on average equity (%)return on average assets (%)abcq2 2011q3 2011q4 2011q1 2012q2 2012q2 2011q3 2011q4 2011q1 2012q2 2012akbankalbarakabank asyagarantihalkbankisbank

36、vakifbankyapi kredi15%13%11%23%26%18%11%16%11%17%12%11%25%7%14%14%13%21%10%18%24%19%11%17%12%15%9%19%24%15%18%17%12%23%10%15%28%20%11%11%akbankalbarakabank asyagarantihalkbankisbankvakifbankyapi kredi2.2%1.4%1.5%2.8%2.5%2.3%1.2%1.9%1.4%1.7%1.5%1.3%2.3%0.9%1.4%1.6%1.7%2.0%1.2%2.1%2.2%2.1%1.2%1.8%1.6%

37、1.5%1.1%2.3%2.3%1.7%1.8%1.9%1.5%1.8%1.2%1.9%2.9%2.3%1.2%1.3%source: company datareturn on average equity (roae) for the sector went down by 2.4% q-o-qand 0.2% on a y-o-y basis at 14.0% in q2 2012. net income was down 11%q-o-q but was up 12% y-o-y in q2 2012. of the banks in our coverageuniverse, hal

38、kbank had the highest roae of 28% and bank asya the lowestat 10% in q2.as at end q2 2012, on bank-only financials, garantis tier-i ratio was thestrongest at 15.3% (down 37bp q-o-q), while akbanks was 15% (down 54bpq-o-q). the ratio for yapi kredi was lowest at 11.0% (down 34bp q-o-q).tier one ratio

39、(%)source: company datathe sectors return on average assets (roaa) was down by 28bp q-o-q and5bp y-o-y to 1.7% in q2 2012. halkbank (2.9%) followed by isbank (2.3%)had the highest roaa under coverage while asya and vakif (both 1.2%) hadthe lowest.the sectors capital adequacy ratio was 16.5% at the e

40、nd of q2 2012, up27bp q-o-q but down 64bp y-o-y. except garanti all banks under coveragehad lower-than-sector-average capital adequacy ratios in q2 2012.capital adequacy ratio (%)q2 2011q3 2011q4 2011q1 2012q2 2012q2 2011q3 2011q4 2011q1 2012q2 2012akbankalbarakabank asyagarantihalkbankisbankvakifba

41、nkyapi kredi16.9%13.4%12.7%15.8%14.3%14.2%12.9%11.5%16.4%13.0%12.6%14.8%13.8%13.0%12.4%11.0%16.4%11.9%12.9%15.0%13.8%13.0%12.4%11.2%15.6%11.7%13.2%15.7%13.4%12.4%12.2%11.3%15.0%11.9%13.0%15.3%13.4%12.6%12.2%11.0%akbankalbarakabank asyagarantihalkbankisbankvakifbankyapi kredi17.8%14.0%13.2%18.0%15.0%

42、16.0%14.0%14.1%17.2%13.6%13.1%16.9%14.5%14.6%13.4%13.8%17.0%12.5%13.3%16.9%14.3%14.1%13.4%14.7%16.5%12.3%13.6%16.9%14.2%13.9%13.4%14.8%16.0%12.4%13.5%16.6%14.7%14.2%13.4%14.5%source: company datasource: company data5q22005q32005q42005q12006q22006q32006q42006q12007q22007q32007q42007q12008q22008q32008

43、q42008q12009q22009q32009q42009q12010q22010q32010q42010q12011q22011q32011q42011q12012q22012jan-10feb-10mar-10apr-10may-10jun-10jul-10aug-10sep-10oct-10nov-10dec-10jan-11feb-11mar-11apr-11may-11jun-11jul-11aug-11sep-11oct-11nov-11dec-11jan-12feb-12mar-12apr-12may-12jun-12jul-12aug-12sep-12oct-09nov-09

44、dec-09jan-10feb-10mar-10apr-10may-10jun-10jul-10aug-10sep-10oct-10nov-10dec-10jan-11feb-11mar-11apr-11may-11jun-11jul-11aug-11sep-11oct-11nov-11dec-11jan-12feb-12mar-12apr-12may-12jun-12200020012002200320042005200620072008200920102011e 2012e 2013e 2014e 2015e 2016e 2017e-2commercial banksturkey9 oct

45、ober 2012economic indicatorsabc turkeys gdp grew by 2.9% y-o-y in q22012, versus a revised hsbc estimate of2.7% for 2012. hsbcs gdp growth forecast for 2012 nowstands at 2.7% y-o-y, and 3.8% for 2013from 2.0% and 3.5% earlier. in 2011, gdpgrowth was asymmetric and unbalanced,driven by domestic deman

46、d and very little byforeign demand. in 2012, growthrebalanced, with domestic demand losingpace and net foreign demand drivingheadline gdp growth in september 2012, rose to 9.19%, up by103bps m-m and rising from 6.15% inseptember 2011. inflation, after a decline forthree consecutive months from may t

47、o july2012, has been rising for the past twomonths. based on the main expendituregroups, the index for miscellaneous goodsand services increased the most m-o-m by2.26% in september. on the other hand,indices for clothing and footwear declinedthe most in september by 2.62%. in june 2012, the unemploy

48、ment rate was8.0%. this was lower by 0.2ppt on a m-o-mand 1.2ppt on a y-o-y basis. in august 2012, the trade deficit came in atusd5.86bn down usd8.23bn in august2011.turkey real gdp growth (y-o-y %)15%10%5%0%-5%-10%-15%source: turkish statistical instituteunemployment rate (%)15129630source: turkish

49、 statistical instituteinflation growth (y-o-y %)12%10%8%6%4%2%0%source: central bank republic of turkeycurrent account deficit (% of gdp)20-4-6-8-10-12source: international monetary fund6jun-08aug-08oct-08dec-08feb-09apr-09jun-09aug-09oct-09dec-09feb-10apr-10jun-10aug-10oct-10dec-10feb-11apr-11jun-1

50、1aug-11oct-11dec-11feb-12apr-12jun-12aug-12commercial banksturkey9 october 2012net interest margin (nim) improvement in l/d spread continues, yet cpi-linkers put pressureabc the banking sectors net interest margin(nim) came in at 4.11% in august 2012,nim of turkish banking sectoradjusted nim (for fx

51、 and trading gains) of the sectordown 14bp m-o-m but up 124bp y-o-y. they-o-y increase was mostly owing to a lowerasset-liability spread which declined by12bps m-o-m.4.6%4.4%4.2%4.19%4.18%4.34%4.25%4.11%4.5%4.0%4.13%4.22%4.36%4.29%4.16% net interest income (nii) came in attry4.2bn in august 2012, up

52、 c57% y-o-ybut down 2% m-o-m.4.0%3.8%3.5%3.16% the sectors adjusted nim stood at .16%,up 165bps y-o-y but down 13bps m-o-m inaugust 2012. this was mainly owing to atrading gain of try46mn in the monthcompared to a gain of try35mn in july2012 and a loss of try338mn in august2011. however the sequenti

53、al decline innim was mainly attributable to a 12bps3.6%3.4%3.2%3.0%3.39%3.0%2.5%2.0%contraction in asset-liability spread.3q 112q 12jul-aug 12jun-12jul-12aug-123q 112q 12jul-aug 12jun-12jul-12aug-12 consequently, the banking sectors adjustednii was try4.3bn in august 2012, up 82%y-o-y but down 2% m-

54、o-m. in august 2012, the total loan-to-time-deposit spread increased by 31bps m-o-m,source: brsa monthlyloan-to-time-deposit spread (try)source: brsa monthlytry loan yields, try time deposit costs, benchmark bond and o/n borrowing rateand 94bps y-o-y, to 3.5%. the try loan-to-time-deposit spread cam

55、e in at 3.0% (up40bp m-o-m and y-o-y) and the fx loan-to-time-deposit spread was recorded at 2.57%(up 38bp m-o-m and 83bp y-o-y).3.1%3.0%2.9%2.8%2.7%2.6%2.57%2.78%2.81%2.55%2.61%3.00%25%20%15%10%5%13.0%10.0%7.6%5.8%2.5%2.4%2.3%0%3q 112q 12jul-aug 12jun-12jul-12aug-12try loan y ieldcbrt policy ratetr

56、y deposit costbenchmark interest rate end-monthsource: brsa monthlysource: brsa monthly7feb-10feb-11feb-12aug-09aug-10aug-11nov-09nov-10may-10may-11nov-11may-12aug-12-commercial banksturkey9 october 2012asset quality signs of deterioration, npl ratio continues to rise, coverage continues to fallabc

57、in august 2012, the cost of risk rose to 1.0%, up30bp m-o-m and 42bp y-o-y. loan loss provisionscost of risk (loan-loss provisions/average loans)npl ratio of deposit and participation banksincreased by 45% m-o-m and more than doubledon a y-o-y basis to try624m in august 2012.1.2%1.04%1.00%6.0%5.5% t

58、he sector npl ratio though declined by 106bp m-o-m but rose by 2.57ppt y-o-y to 2.79% in august2012.1.0%0.8%0.86%0.85%0.70%5.0%4.5% for deposit banks, the npl ratio stood at 2.85%,0.58%4.0%up 8bps m-o-m and 13bps y-o-y. for participation banks, the npl ratio was up by7bp m-o-m and 9bp y-o-y at 3.12%

59、 at the end ofaugust 2012. by the end of august 2012, gross sector nplsincreased by 3.8% m-o-m and 14.9% y-o-y to0.6%0.4%0.2%3.5%3.0%2.5%2.0%1.5%3.12%2.85%2.79%ctry21.5bn.0.0%jul-08jan-09jul-09jan-10jul-10jan-11jul-11jan-12jul-12 in august 2012, the sectors general loan-lossprovisions decreased by 3

60、2% m-o-m to3q 112q 12jul-aug 12jun-12jul-12aug-12deposit banksparticipation bankssectortry150mn. on the other hand, total provisioningexpenses declined by 18% m-o-m mostly owing tolower provisions on securities. the sector coverage ratio stood at 76.7% insource: brsa monthlychanges in the npl ratios of