The BRSA (banking watchdog) released 26 November 2010 data for the banking sector. We have observed strong growth rates both in loans (4.8% qtd) and deposits (3.5% qtd) in 4Q10 so far following the end of 3Q10. YtD lending expansion stood at 26.5% as end of November, so that the annual loan growth in 2010 will be around 30% in the sector.
So far in 4Q10, corporate & commercial loans grew faster with 5.4% compared to the headline loan growth, which also calls for some drop in net interest margin (NIM) of the banking sector, as corporate loans are relatively lower yielding with respect to the other business lines. Other than the 1.3% qtd growth in credit card loans, the growth in consumer loans remained strong at 5.1% qtd, bringing the ytd consumer loan growth to over 32%.
The on balance short FX position of the sector has been hovering around USD 20bn so far in 4Q10 (doubled compared to 3Q10), which may act as a buffer against the possible NIM losses originating from the strong growth in corporate& commercial segment.
Among banking groups w.r. to ownership structure, we observed that public banks achieved the highest lending expansion with 7.3% qtd. Given the loan yields remained almost unchanged in 4Q10 compared to 3Q10 and adding the 3.9% qtd deposit growth (parallel to the sector average) we expect the loan/deposit spread of public banks to be better than the sector average. In that respect Halkbank and Vakifbank share prices may react more positively to the data release.
Participation banks have also done better than the sector average in 4Q10 so far with 6.2% qtd loan growth. Not only in the retail segment, but these banks have been also successful in corporate and commercial (SME) segment. Blended with the bottoming out interest rate environment we do expect a better NIM formation in participation banks going forward. Therefore the operational improvement may lead a positive sentiment in Bank Asya and Albaraka Turk's share prices.
Turkish banks are currently trading with an average 2011e P/E of 10.3x and 2011e P/BV of 1.8x. We estimate the 2011 RoE at 18.6% for our coverage average. These ratios are 9.7x, 1.3x and 16.2% according to median CEE for Erste's coverage. Given these figures Turkish banks seem a bit pricy. The higher RoE of Turkish banks is partly compensated by the strong capitalization and the higher growth outlook. Although we do not expect an immediate upward distortion in interest rates, Brazil like monetary tightening may be on the agenda for Turkish banks going forward, which makes us cautious for Turkish banks. bne.
Source : http://www.balkans.com/open-news.php?uniquenumber=83724 - Dec 8, 2010
