We are assigning Buy recommendations to the TSKB (TSKBTI) senior and subordinated bonds, excluding the TSKBTI 5.375% 2019, which matures in October. We see most value in the TSKBTI 7.625% 2027, the issuer’s only subordinated bond. Priced to the 2022 call, the TSKBTI 7.625% is over 2x as wide as the TSKB 2023 senior security, and this spread multiple is very close to the highest it has ever been. The TSKBTI 7.625% bond has also widened versus the Isbank (ISCTR) 7% 2028 bond. The spread difference versus Isbank now exceeds 300bps (indicative mid z-spreads).
As at other Turkish lenders, key near-term risks to our view include escalation of tensions between the US and Turkey, TRY weakness and significant asset quality deterioration. For TSKB, a return of reports regarding a change in ownership at Isbank is an additional risk.