Please refer to important disclaimer at the end of the report.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

  

 

   

TSKB (TSKB TI/TSKB.IS)

Equity Research29 January 2016

Banks

Outperform

Unique business model + prudent management + higher ROE …

TSKB’ 4Q15 NI came in at TL115mn (+39% q/q and +41% y/y) bringing full year EPS growth to 10% y/y. The bottom line was in line with both our estimate of TL112mn and consensus estimate of TL113mn. Quarterly NI increase was mainly supported by 61bps q/q NIM increase thanks to 1) higher CPI linker income (TL39mn vs. TL9mn in 3Q15) and 2) TL7mn trading gain vs. TL5mn trading loss in previous quarter.

On our ROE gap study amongst the banks under our coverage, TSKB offers the best value with positive ROE-CoE spread. Bright spots includes, robust ROE generation, strong asset quality and strong capital position.

Please recall that following 10% 2015E NI growth we expect 23% EPS growth both in 2016E and 2017E. We believe TSKB can delivered its investors 18.5% ROE in 2016E and 20% in 2017E, which is well above the sector average of 13% in both years. We have an Outperform rating for TSKB with a 12M TP of TL1.85, 28% upside potential (incl. dividend).

Following 10% 2015A NI growth we expect 23% EPS growth in 2016 and ROE of 18%. We expect 23% EPS growth both in 2016 and 2017. TSKB can delivered its investors 18% ROE in 2016 followed by 19% in 2017, in both years above the sector average of 13%.

Its stable business model with higher ROE (TSKB 19% vs. sector 13% 2016E), higher Tier-1 capital ratio (2015 14% vs. sector 12%) and superior asset quality (2016E 0.4% vs. 3.6%) and finally lower cost to income (2016E 16% vs. sector 45%). The bank currently trades at 0.85x P/BV and 5.2x P/E on our 2016E. While TSKB currently trades at 15% premium to the sector on P/BV, but at 17% based on P/E, however we choose to not compare TSKB to other commercial banks because of its unique business model. 91% of its funding is realised through Supranational Funding guaranteed by Turkish Treasury hence cheaper funding even at difficult global liquidity conditions. As a result, there is no currency mismatch and positive duration gap between funding and lending (average loan duration 2.5 years and funding 6 years).

In short term announced share buyback plan by Isbank should be share price supportive. Please recall that, in Dec’15 Isbank the main shareholder (40.85%) has announced that they will be purchasing up to 3% of paid in capital.

Risks. Lower than expected GDP growth, higher than expected funding cost and lower than projected corporate finance and privatisation activity in the country.

Derya Guzel

dguzel@atainvest.com

+90 (212) 310 62 89

Financials, TL mn 2013 2014 2015A 2016E 2017E

Loans 9,172 10,981 13,675 16,137 18,800

Revenue 484 572 635 798 957

NII 486 546 625 780 935

Net income 326 369 407 498 615

BVPS 1.08 1.31 1.42 1.65 1.93

EPS 0.19 0.21 0.23 0.28 0.35

PER (x) 7.9 7.0 6.3 5.2 4.2

PBR (x) 1.36 1.12 1.03 0.89 0.76

ROE (%) 17.9 17.7 19.1 18.5 19.6

Source: Company data and Ata Invest estimates

 

        2  

Company Report

TSKB

TSKB

Income Statement (TL mn) 2011 2012 2013 2014 2015A 2016E 2017E TSKB

Net Interest Income (NII) 364 431 486 546 625 780 935 Sector: BanksFees and comm 10 12 11 11 11 14 17 Bloomberg Ticker: TSKB TINet trading income & FX gains -11 0 -13 15 -2 4 5 Ata Rating: OUTPERFORM

Bank revenues 363 443 484 572 635 798 957Staff cost -33 -44 -47 -47 -63 -79 -96Other cost -32 -29 -27 -68 -38 -47 -58Total OPEX -65 -72 -73 -114 -101 -126 -154Operating Income 298 371 411 458 533 671 803Associates 26 28 30 25 34 35 37Other income 28 19 8 39 42 10 26

Income before provision 352 417 449 522 608 717 866Provisions for loan losses -1 0 -26 -26 -44 -70 -82Other provisions -33 -34 -22 -34 -56 -15 -18Pre Tax Income 318 383 401 462 508 632 767Taxes -62 -76 -75 -92 -102 -135 -154Net income 255 307 326 369 407 497 613

Balancesheet (TL mn) Descriptive SummaryCash and alike 121 133 345 613 1,891 2,081 2,289Due from banks 60 38 7 122 535 588 647Trading securities 104 24 41 72 197 217 239Fixed income securities 2,447 2,881 2,966 3,515 3,844 5,798 8,824Loans 6,367 6,886 9,172 10,981 13,675 16,137 18,800Total IEA 9,099 9,960 12,532 15,302 20,142 24,821 30,798Assets total 9,456 10,290 12,911 15,701 20,735 25,150 30,839Deposits 0 0 0 0 0 0 0Interbank funds 948 1,255 1,609 2,162 2,169 2,632 3,227Funds borrow ed 6,779 6,885 9,002 9,880 13,299 16,131 19,780

Int bearing liabilities 7,727 8,139 10,611 12,042 15,468 18,763 23,007Other liabilities 363 395 415 1,371 2,777 3,501 4,454

Shareholders Equity 1,366 1,755 1,885 2,288 2,489 2,887 3,379

Selected ratios (%) Ownership StructureLoans/Total assets 67.3 66.9 71.0 69.9 66.0 64.2 61.0Securities/Total assets 25.9 28.0 23.0 22.4 18.5 23.1 28.6Loans/Deposits 93.9 100.0 101.9 111.1 102.8 100.0 95.0NPL 0.40 0.20 0.39 0.15 0.43 0.40 0.40LLP/NPL 132.6 248.1 133.1 354.9 168.4 100.0 100.0CIR 17.9 16.4 15.1 20.0 16.0 15.8 16.1Fees coverage of cost 15.2 16.9 14.6 9.8 11.3 10.9 10.9Cost/Total assets 0.7 0.7 0.6 0.7 0.5 0.5 0.5NIM 4.4 4.5 4.5 4.1 3.6 3.6 3.9Net fees/Total assets 0.1 0.1 0.1 0.1 0.1 0.1 0.1ROE 19.4 19.7 17.9 17.7 19.1 18.5 19.6ROA 2.9 3.1 2.8 2.6 2.2 2.2 2.2Growth measures (%)Loans 33.4 8.1 33.2 19.7 24.5 18.0 16.5Deposits 35.6 1.6 30.8 9.7 34.6 21.3 22.6Assets 19.5 8.8 25.5 21.6 32.1 21.3 22.6Net interest income 22.4 18.2 13.0 12.3 14.4 24.7 19.9Fees and comm -26.8 23.5 -12.4 4.3 2.3 20.6 22.0Cost 3.6 11.6 1.0 56.1 -11.2 24.4 22.0Net income 20.7 20.3 6.1 13.3 10.2 22.4 23.5

Capital (TRYm)RWA 7,860 11,341 14,271 17,971 24,885 26,245 33,369Capital 1,499 1,820 2,027 2,386 2,841 3,367 4,027CAR (%) 19.1 20.4 18.2 18.0 14.9 16.0 16.6

Per share data and valuation metricsBVPS (TL) 0.78 1.00 1.08 1.31 1.42 1.65 1.93EPS (TL) 0.15 0.18 0.19 0.21 0.23 0.28 0.35P/E 10.1x 8.4x 7.9x 7.0x 6.3x 5.2x 4.2xP/BV 1.88x 1.47x 1.36x 1.12x 1.03x 0.89x 0.76x

The bank w as established in1950 as Turkey's f irst Industrialand Development Bank. TSKBemploys 330 people and havetw o branches, headquartersbased in Istanbul. The bank w as established to support theinvestments of all enterprises inall economic sectors in Turkey,especially the industry sector.

Isbank Group41%

Vakifbank8%

Others51%

 

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Company Report

TSKB

4Q15 financial results summary

TSKB’s 4Q15 NI came in at TL115mn (+39% q/q and +41% y/y) bringing full year EPS growth to 10% y/y. (Ata Invest 4Q15: TL112mn and consensus TL113mn)

TSKB’ 4Q15 NI came in at TL115mn (+39% q/q and +41% y/y) bringing full year EPS growth to 10% y/y. The bottom line was in line with both our estimate of TL112mn and consensus estimate of TL113mn.

Quarterly NI increase was mainly supported by 61bps q/q NIM increase thanks to 1) higher CPI linkers income (TL39mn vs. TL9mn) and 2) TL7mn trading gain vs. TL5mn trading loss in previous quarter.

The bank closed 2015 with 3.6% NIM, which declined by 48bps vs. 4.1% NIM previous year.

The loan book declined 4% q/q however increased by 24.5% y/y in TL terms, in FX adjusted term lending growth stood at 5% y/y.

On the asset quality side, NPL ratio stood flat 0.43%, the strongest among the banking sector.

On the capital front, CAR improved by 142bps to 14.9% vs. 13.5% in 3Q15, thanks to 1) lower loan growth in 4Q15, 2) much stable TL during the quarter and 3) subsidiary reappraisal.

TSKB's 2016 guidance was announced on 10 Jan 2016: In 2016, the bank expect 12% loan growth (FX adjusted), 30% fee growth, 10% NII growth, 13% opex growth, ROE 17-18% and ROA 2.1%, NIM 3.9%, NPL ratio flat at 0.3%, flat CAR expectation at 15%.

Exhibit 1 - TSKB 4Q15 bank-only income statement summary (TL mn)

Income statement summary 4Q15E Deviation 4Q15A 3Q14 y/y 2Q15 q/q 2014 2015 y/y

Net interest income 165 8% 179 133 35% 151 18% 546 625 14%

Fees and commissions 3 12% 3 4 -15% 4 -5% 11 11 2%

Trading gains (Trading + FX) 5 48% 7 3 N/M -5 N/M 15 -2 N/M

Bank revenues 173 10% 190 139 37% 150 26% 572 635 11%

Operating expense total -25 1% -25 -25 0% -24 7% -114 -101 -11%

Operating income 148 11% 164 114 45% 126 30% 458 533 16%

Associates 1 N/M 0 1 N/M 0 N/M 25 34 37%

Cash f low 149 10% 164 115 43% 126 30% 482 567 17%

Total provisions -15 21% -18 -14 32% -21 -13% -60 -100 66%

Other income 2 -44% 1 1 -14% 1 19% 39 42 6%

EBT 136 8% 147 102 44% 106 38% 462 508 10%

Taxes -24 33% -33 -21 55% -24 35% -92 -102 10%

Net income 112 3% 115 81 41% 82 39% 369 407 10%

Source: Company data, Ata Invest Estimates

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