Fixed Income Analysis /
Turkey

Kuveyt Turk: Q2 review – Impressive performance

    Tolu Alamutu
    Tolu Alamutu

    Credit Research Analyst, Banks

    Tellimer Research
    8 August 2019
    Published by

    Strong fundamentals support current valuations: We are assigning Hold recommendations to the Kuveyt Turk (KFINKK) 2021 and 2026 bonds. Recent results were impressive – KFINKK generated an annualised ROE of c24% in Q2. 

    In addition, the AT1 issue completed in July will boost Kuveyt Turk’s capital ratios, and a further boost to capital is possible next year. Further, the KFINKK securities were more resilient than most Turkish bonds in August and September 2018. However, we believe current valuations largely reflect these positives. 

    We see slightly better value in the KFINKK 2026 subordinated bond. Priced to the 2021 call date, this bond is over 2x as wide as the KFINKK 2021 security (though that the spread multiple was as high as 2.5x just before the US$200mn perpetual security was placed).