2Q23 Earnings Preview (Oyak Yatırım)

OYAK Securities - 2Q23 Earnings Preview

2Q23 earnings start on Friday after market close with Arcelik
Within our coverage universe ARCLK is expected to announce its financials this Friday followed by YKBNK on July 24th. Deadline for 2Q23 results reporting is August 9th for unconsolidated financials & insurance companies and August 21st for consolidated industrials & insurance companies. We expect our coverage universe's aggregate earnings to increase by 17% y/y in 2Q23, mainly driven by the 28% y/y increase in non-financials' earnings, while banks' earnings should also rise by only 2% y/y.

Earnings quality of banks set to drop in 2Q
Banks' earnings season is to kick off with YKBNK as of 24 July, followed by AKBNK and GARAN. We expect earnings to increase by only 3% q/q and 2% y/y for the banks in our coverage in 2Q23. Core revenues (NII + fees) should contract 22% 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 3ppt q/q decline in TL spread leading to a 2ppt lower core spread in 2Q vs 1Q 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 2ppt 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 2Q thanks to strong FX and derivatives trading coupled with 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 2Q. We envisage net CoR to deteriorate in 2Q on some NPL inflows and currency impact. In q/q terms, we expect the highest EPS growth from ALBRK, followed by AKBNK and TSKB.

Non-financials' 2Q23 total net profit to rise by 28% and 38% y/y and q/q, respectively
We expect total net profit of non-financial companies under our coverage to be affected by normalization in margins and higher q/q depreciation of TL against USD at end-2Q23 (%35) compared to end-2Q22 (14%). 2Q22 base had included effects of slow recovery from Omicron worries and start of Russia-Ukraine war. In our view, 2Q23 results should have been affected by numerous factors including inflation, shift in Ramadan calendar, double elections in May, February dated devastating earthquakes' aftermath, lower fuel prices, ease in electricity, gas and transportation costs contrary increasing personnel expenses. We expect total profit to increase by 38% q/q due to 1Q23's weak seasonal base hit by production costs and one-off earthquake related costs. In terms of companies' (with positive 2Q23 net incomes) y/y net income growth, we expect TRGYO, TTRAK, DOAS, AKCNS and INDES to be the leading companies. On the contrary, PETKM, TKFEN, TUPRS, KRDMD and AYGAZ are expected to net income declines. There are two companies in our coverage which we expect red bottom-lines. We forecast TTKOM and ULKER's 2Q23 net losses as TL1.4bn and TL1.97bn, respectively.

EBITDA of non-financials to increase by 39% and 41% y/y and q/q, respectively
In terms of y/y EBITDA growth ranking, TTRAK, DOAS, PGSUS, AKCNS and ARCLK are expected to post highest performance within our coverage. On the flip side, PETKM, TKFEN, ALKIM, AKSEN, KOZAL and AKSA could post weaker EBITDA performance y/y in 2Q23.


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