Fixed Income Analysis /

Isbank: Q2 review – High hopes for H2

    Tolu Alamutu
    Tolu Alamutu

    Credit Research Analyst, Banks

    Tellimer Research
    12 August 2019
    Published by

    Great expectations: We are assigning a Hold recommendation to the Isbank (ISCTR) 5% 2020 bond and Buy recommendations to the ISCTR securities maturing after 2020. As at other major Turkish banks, yields on Isbank bonds are no longer as attractive as was once the case. However, excluding the ISCTR 5% 2020, these bonds are still quoted 200bps or more off historic tights. 

    Comparing Isbank to peers, we note that the spread differences between the Isbank 5.5% 2022 senior bond and the Akbank 2022s and Garanti 2022s have narrowed from more than 600bps in August 2018 to less than 60bps at the time of writing. However, these differences have been as narrow as 20-30bps in the past. 

    Having said this, we acknowledge that Isbank’s performance in Q2 was somewhat unremarkable. Consolidated net income of TRY1.1bn meant that Isbank generated an annualised ROE of less than 8% on our calculations. Comments from management suggest that performance should improve in H2, driven by a modest recovery in operating conditions. No changes were made to previous guidance.