Turkish Banking Sector 1Q23 Preview(TFG Istanbul Menkul Değerler )

Could Have Been Much Worse
The first quarter was marked with further deterioration in TRY core spreads in the vicinity of 250-500bps q-q, resulting as deep as 2pp negative spreads for some banks and breakeven for most. Regulatory pressure that enforced banks to switch from FX deposits to TRY was the key underlying reason behind such a harsh P/L impairment. For not to be penalized by the enforced long-end bond holding requirement, banks pushed up their TRY time deposit rates to over 30% to surpass the 60% TRY deposit threshold. On the other hand, commercial loan yields are down to 13% levels to overcome the bond holding obligations. That is why the TRY deposits surged by a massive 23% in a single quarter while FX deposits contracted by 3%.
Another factor that curbed down the NII was the plunge in CPI linker yields. CPI base of these papers that used to be roughly 85% for 2022 have been revised down according to each banks’ own assumption. Halkbank worked with a 58% inflation assumption while Akbank and Garanti picked 35%. Others are in-between. with higher assumptions for 1Q23 will end up reversing their NIIs in the quarters to follow, whereas the lower ones for 1Q are set to have upward NII adjustments in later quarters. OPEX is another soft spot of the quarter with more than doubling numbers y-y for private and more than tripling numbers for state banks due to earthquake related costs, customer acquisition spendings and other inflation adjustments. In-all the aggregate quarterly profits of the banks are likely to slide 40% in 1Q23 qoq, which could have been worse without extraordinarily low provisions as well as very high reversals, mostly done through management discretion.
We expect Garanti Bank to have a relatively limited qoq profit erosion and highest yoy profit growth among the private banks as it was a latecomer to the deposit price competition. We expect Akbank to face the steepest qoq profit contraction as the TRY loan-deposit spread of the bank is expected to come down by 440bp qoq into the red, while that of Garanti will come down by 290bp to a still positive 4% in our view.
 
 TFG Istanbul Menkul Değerler A.Ş.
  www.tfgistanbul.com/arastirma-raporlar
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                  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.