1Q23 Earnings Preview (Oyak Yatırım)

1Q23 earnings start today after market close with Arcelik
Within our coverage universe Arcelik is expected to announce its financials today followed by TAVHL on April 25th. Deadline for 1Q23 results reporting is May 2nd for unconsolidated financials & insurance companies and May 10th for consolidated industrials & insurance companies. Banks will also announce their unconsolidated financials until May 10th. We expect our coverage universe's aggregate earnings to increase by 57% y/y in 1Q23, mainly driven by the 64% y/y jump in non-financials' earnings, while banks' earnings should also rise by 49% y/y.

Earnings quality of banks set to drop in 1Q
Banks' earnings season is to kick off with Akbank as of 26 April, followed by Garanti and Yapi Kredi. We expect earnings to retreat by 43% q/q, yet up by 50% y/y for the banks in our coverage in 1Q23. Core revenues (NII + fees) should contract 40% q/q on core spread decline due to high deposit costs and low CPI-linker yields linked to y/y reduced CPI assumptions of banks for this October. We expect almost 4ppt q/q decline in TL spread leading to a 3ppt lower core spread in 1Q vs 4Q for our coverage. Regulatory headwinds were the main culprit of spread weakness at banks. Banks cannot surpass certain interest thresholds in order not to buy additional low yield government bonds, which also weighs negatively on loan volumes. Reflecting all, we foresee 5.5ppt q/q NIM squeeze for top-tier banks in our coverage.

Fee income should go further up from last year's lows thanks to consumer driven loan growth and payment systems contribution. Trading line should be q/q more supportive of earnings in 1Q due to strong securities trading and declining swap costs. We expect opex to rise above inflation fueled by high HR costs on salary increases coupled with earthquake donations. Subsidiaries income and collections are to support other banking income in 1Q. We envisage net CoR to improve in 1Q on intact asset quality and provisioning reversals. In y/y terms, we expect the highest EPS growth from Albaraka, followed by TSKB and Halkbank. In q/q terms, we expect the highest EPS growth from Albaraka, while all other banks in our coverage is expected to experience earnings erosion. Earnings of TSKB and Halkbank should be dented relatively less than peers in q/q according to our estimates.

Non-financials' total net profit to rise by 64% y/y, yet decline by 60% q/q
We expect total net profit of non-financial companies under our coverage to be higher y/y affected by weak Omicron base, higher inflation, strong domestic and export demand in some particular sectors and lower TL depreciation q/q in annual terms. We expect total profit to decline by 60% q/q due to 4Q22's strong base, elevated production costs and one-off earthquake related costs. In terms of companies' (with positive 4Q22 net incomes) y/y net income growth, we expect TUPRS, MGROS, ENJSA, AKCNS and TRGYO to be the leading companies. On the contrary, KRDMD, OTKAR, SISE, KRVGD and ASELS are likely to report weaker bottom-lines y/y.

EBITDA of non-financials to post 42% y/y increase, despite a 21% q/q contraction
We expect total EBITDA of non-financial companies to increase by 42% y/y on the back of strong revenue growth, but contract by 21% q/q due to higher labor, energy and earthquake related costs. In terms of y/y EBITDA growth ranking, AKCNS, PGSUS, DOAS, TTRAK and TUPRS are expected to post highest performance within our coverage. On the flip side, PETKM, AYGAZ, KRDMD, AKSEN and AKSA could post weaker EBITDA performance y/y in 1Q23.


Oyak Yatırım Menkul Değerler A.Ş.
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