Ownership matters: We are assigning a Buy recommendation to the Alternatifbank (ALNTF) 8.75% 2026 bond. ALNTF now has just one US$-denominated eurobond outstanding and the issuer expects to receive more capital from its owner, Commercial Bank Qatar; which we see as positive. In addition, priced to the final maturity, the ALNTF bond is still almost 100bps wider than the Akbank (AKBNK) 7.2% 2027 security, and the YTM is c10%. Having said this, we acknowledge that the ALNTF bond is quoted almost 40ppts higher than in mid-August 2018, and the best performance may now be behind us.
Good enough results: Alternatifbank reported net income of TRY59mn for the second quarter, generating an annualised ROE of just over 10%. Q2 19 net income was down almost a third on restated figures from a year ago, but was 13% higher than in the previous quarter. The qoq improvement reflects solid net interest income, good cost control and lower provisions. Unsurprisingly, the NPL ratio rose in the quarter. However, the coverage ratio also increased. On capital, Alternatifbank’s Tier 1 ratio remains low relative to other banks, but further capital injections from the parent company should mean this ratio improves over time.