Morning Note /
Turkey

Turkey: We expect negative openings

  • As 4,000 resistance was not broken up, selling in BIST increased and the index closed at 3,934 level yesterday

  • Today there will only be half day trading and a weak opening is likely in BIST 100

  • 3.900 support should hold otherwise 3.875 can easily be tested.

Zeynep Erman
Zeynep Erman

Equity Research Analyst

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ATA Invest
28 October 2022
Published byATA Invest

As 4,000 resistance was not broken up, selling in BIST increased and the index closed at 3,934 level yesterday, Today there will only be half day trading and a weak opening is likely in BIST 100. 3.900 support should hold otherwise 3.875 can easily be tested.

Macro news:

Foreign trade deficit increased by 268.1% y/y to US$9.60bn (-14.7% m/m) in Sep’22. Proportion of imports covered by exports declined by 1,862bps to 70.2% in Sep’22. Net gold imports realized as US$2.6bn in Sep’22 (Sep’21: US$256mn). Gold trade excluded proportion of imports covered by exports declined by 1,342bps y/y to 76.4% in Sep’22. Germany got the first spot in the major export destinations with US$2.00bn (18.2% y/y) in Sep’22. Exports to USA (stands as the second major export destination) declined by 0.7% y/y to US$1.38bn in Sep’22. Russia got the first spot in the major import destinations. Imports from Russia increased by 157.7% to US$6.23bn in Sep’22. Imports from China (stands as the second major import destination) increased by 28.1% y/y to US$3.71bn in Sep’22.

Company news:

GARAN TI> posted 3Q22 NI of TL17,545mn (+36% q/q), 3% higher than our and consensus estimate. The key points of 3Q22 were 1) 3Q ROAE increased to 57.1% from 49.6% in 2Q and 9M22 ROAE stood at 49% vs. 20.1% in 9M21 2) Net interest income (including swap costs) was up 78% q/q as CPI linker income increase 198% (higher CPI book plus CPI estimate revision from 50% to 65%), 3) Quarterly swap adjusted NIM improved 400bps q/q to 11.7%(6.2% core NIM+5.5% CPI linker impact) 4) Year-to-date TL loan growth reached 56%, with a visible slowdown in all segments except credit cards(+27% q/q) in 3Q, while FX loan book continued to shrink( -14% ytd) Garanti shares are up 115% year-to-date vs. 139% for BIST banking index and 112% for BIST-100. 2022 has been an exceptional year for the banking sector in Turkey, mostly driven by the higher inflation impact on CPI linker valuations ( 37% of Garanti’s net interest income in 9M22 came from CPI linkers vs. 58% for Akbank). FX-protected deposit scheme and lower CBRT fund rate policy have benefited banks asset-liability management and also contributed to the improvement of core NIM. The strong economic activity in 2022(GDP +7.5% y/y in 1H22) have kept cost of risk low( 78 bps for 9M22), hence provisioning costs remained muted and thanks to the resolving of the Turk Telekom issue, there are no more surprise provisioning cost popping up either. Is the best for the banking sector behind us in terms of earnings momentum? Most probably yes, for a couple of reasons. 1) Headline CPI will come down in 2023 unless there is another FX shock 2) The new regulations on loan pricing caps and obligatory government bond purchases if benchmarks are not met have created an interest rate risk for 2023 and onwards( this week’s 10-year TL g-bond auction yield was 10.57%). Although fix rate securities still make up small portion of banks’ securities portfolio, these low yields might impact ROA negatively over the longer term 3) We still think there is big possibility of higher CBRT funding rates in the future, despite the fact that we will have 9% CBRT funding rate as early as November.

 *MPARK TI> bought back 125K shares at an average price of TL65.49 on 27 October 2022. Since 25 May 2022, the total number of shares bought back reached 5.8mn at an average price of TL45.65.

 *ALARK TI> bought back 158K shares at an average price of TL62.79 on 27 October 2022. Since March’18 2022, the total number of shares bought back reached 2.2mn at an average price of TL42.52.

 Weekly Agenda:

Oct, 28: Half day trading in BIST the market will close at 12:40