GuruFocus -
- Quarterly Net Income: TRY8 billion, up 12% quarter-on-quarter from TRY7.2 billion.
- Nine-Month Cumulative Net Income: TRY27.2 billion, up 81% year-on-year.
- Total (EPA:TTEF) Asset Size: Exceeded $104 billion, surpassing the $100 billion milestone for the first time.
- Core Banking Revenues: Grew 125% annually, from TRY40 billion to TRY90 billion.
- Net Interest Margin: Reported at 3%, with swap-adjusted margin improving to 2.7% from 1.15%.
- Net Commission Income Growth: Annual growth above 100%, with a specific increase of 104%.
- Fee to OpEx Ratio: Increased to 65% from 58% a year ago.
- Net Cost of Risk: 85 basis points, showing normalization from negative levels earlier in the year.
- NPL Ratio: Increased to 1.8%, aligning with the sector average.
- International Funding: Raised nearly $9 billion, including a $500 million Eurobond at 6.95% yield.
- Lending Growth: Total lending growth at 8.6% quarterly, above sector average.
- Capital Adequacy Ratio (CAR): Reached nearly 16%, boosted by a $700 million Tier 2 issue.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Turkiye Vakiflar Bankasi (IS:VAKBN) TAO achieved a significant milestone by surpassing a total asset size of $100 billion for the first time in its 70-year history.
- The bank reported a quarterly net income of TRY8 billion, marking a 12% increase compared to the previous quarter, and a 81% increase in nine-month cumulative net income year-over-year.
- Strong performance in core banking revenues, with a 125% annual growth in net interest income and net fee and commission income.
- The bank's net commission income showed robust growth, with an annual increase of over 100%, contributing to a fee to OpEx ratio of 65%, one of the highest in the last decade.
- Turkiye Vakiflar Bankasi TAO maintained a strong position in international funding, raising almost $9 billion through wholesale borrowing activities, including a successful $500 million sustainable Eurobond issue.
- The bank's NPL (Non-Performing Loan) ratio increased to 1.8%, aligning with the sector average but reflecting a 30 basis point increase from the previous quarter, primarily due to retail and credit card inflows.
- Despite improvements, the bank's net interest margin remained flat at 3% compared to the previous quarter, with a significant reliance on CPI-linked securities for future margin improvements.
- The bank's residential mortgage portfolio contracted, indicating a lack of appetite compared to private peers who showed growth in this area.
- Turkiye Vakiflar Bankasi TAO revised its full-year ROE (Return on Equity) guidance downward to the low 20s from the previous 30% due to limited recovery in net interest margin.
- The bank anticipates a substantial decline in interest income from securities in the first quarter of 2025 due to a lower CPI estimate, which may impact net interest margin negatively.
A: Our strategy has focused on growing our corporate and commercial lending faster than retail, unlike many peers. We have also been cautious with residential mortgages. This approach has resulted in higher loan yields. For Q4, we expect strong net interest margin performance due to additional contributions from CPI linkers and our strategic focus. For 2025, while the budget is still under discussion, we anticipate a contraction in security yields in Q1 due to lower CPI estimates, but this may be offset by improvements in our spread.
Q: You have been active in wholesale markets this year. How do you see market conditions, and do you plan more issuances?
A: This year has been very active for us in wholesale funding, including Eurobond issuances. We plan to remain active, especially in using our DPR program and collaborating with IFI entities for ESG projects. While we will continue to explore Eurobond issues, we may focus more on DPR and IFI transactions next year.
Q: What are your expectations for asset quality and NPL ratios?
A: Our NPL ratio increased to 1.8%, aligning with the sector average. This rise is mainly due to retail and credit card inflows. We expect a similar net cost of risk in the final quarter, aiming for a positive annual net cost of risk for 2024.
Q: Can you discuss your capital position and any recent changes?
A: Our total capital adequacy ratio has increased to nearly 16%, partly due to a $700 million Tier 2 issuance in July, which boosted our ratio by 130 basis points. Internal capital generation and profitability also contributed to this increase.
Q: How do you see the impact of macroeconomic conditions on your performance?
A: We use official government macro expectations for planning. The timing and level of interest rate cuts by the Central Bank of Turkey will be crucial for our net interest margin evolution. We anticipate challenges in Q1 2025 due to lower CPI estimates but expect improvements in our spread to mitigate these effects.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.