Long Garan / Short Isctr (TFG Istanbul Menkul Değerler )

LONG GARAN / SHORT ISCTR
 
• On the way to the release of 3Q22 results, we are recommending to go Long on Garanti Bank and Short on Isbank shares. Turkish banks will start posting their 3Q financials starting with Akbank on October 26th followed by Garanti on 27th.
• For the sector, we envisage flattish core spreads, stable asset quality, boosted CPI linker yields, slower commercial vs faster consumer lending and continued massive flow from FX funding into TRY denominated exchange rate protected deposits. Higher TRY funding to dramatically pull-down swap utilization, so there will be less swap cost load in trading lines. The drawback of the quarter will be augmenting operating expenses to beyond the CPI growth for most banks.
• Among private banks, we expect Garanti to diverge positively from the peers thanks to up to 200bp qoq TRY spread improvement, predominantly on the back of sliding funding costs and surging inflation base of CPI linkers from 45% in 2Q to 75% in 3Q.
• Isbank, on the other hand, may lag behind Garanti as we are looking for a limited 40bp TRY spread improvement as the bank was more competitive in deposits. Unlike its peers, the bank will not get sufficient support from CPI linkers as the market participants’ survey is used for their valuation. Additional qoq contribution of CPI linkers for Isbank is likely to be in the vicinity of TRY700-800mn, which is quite limited as compared to our expectation of TRY6.5-7bn incremental contribution for Garanti. There could also be a couple of NPL files deteriorating Isbank’s asset quality, in our view. Net COR was almost nil for Isbank when the currency impact was isolated. We believe that the net COR may jump up to over 200bp levels for 3Q.
• Garanti has underperformed Isbank by 28% YTD. Garanti/Isbank pair ratio has come down from 3.54x at the end of 2021 down to 2.54x as of yesterday’s closing. We expect a move up to 3x levels on the way to the release of the quarterly financials. Stop loss is 2.3x pair ratio.
• In all, we are in anticipation of a somewhat flat quarterly earnings from Isbank at TRY14.5bn, while Garanti is likely to have its bottomline increasing by 40% qoq from TRY12.9bn in 2Q22 to TRY18bn in 3Q22. Based on quarterly earnings evolution differential, as well as the YTD relative stock performance, we issue a long Garanti Bank short Isbank pair trade.

 TFG Istanbul Menkul Değerler A.Ş.
  www.tfgistanbul.com/arastirma-raporlar
                           ***
                  Yasal Uyarı
 
 Burada yer alan yatırım bilgi, yorum ve tavsiyeler yatırım danışmanlığı kapsamında değildir.Yatırım danışmanlığı hizmeti ; aracı kurumlar, portföy yönetim şirketleri, mevduat kabul etmeyen bankalar ile müşteri arasında imzalanacak yatırım danışmanlığı sözleşmesi çerçevesinde sunulmaktadır.Burada yer alan yorum ve tavsiyeler, yorum ve tavsiyede bulunanların kişisel görüşlerine dayanmaktadır.Bu görüşler mali durumunuz ile risk ve getiri tercihlerinize uygun olmayabılır.Bu nedenle, sadece burada yer alan bilgilere dayanılarak yatırım kararı verilmesi beklentilerinize uygun sonuçlar doğurmayabilir.