According to the 2011 budget figures, the bank aims 20% growth in the total funds collected. More than half of Albaraka's deposit base comprises of 1-month rolling accounts. The management wants to extend its funding maturities through pushing forward its periodically income sharing products. Albaraka's blended reserve requirement rate is roughly 7%, meaning the bank locks up some TL 50mn funds inactively in the Central Bank's accounts. Demand deposits growth will be higher at 25% as Albaraka plans to require some cash to be left idle in the bank from its noncash loan clientele. Currently, Albaraka offers 75% income sharing rate to TL deposits, and its blended income sharing rate is around 80%.
Cash loan growth should be around 20-25% as the management plans to increase, and possibly extend the maturity of, its murabaha syndicated loan. Hence, we think that 2011 loan growth will be much more skewed to 25%. The bank also plans to change its loan composition in favour of retail segment. Corporate loans, predominantly construction sector, have the lion's share in its loan mix with 55% followed by the SME loans with 37% share. Albaraka will bring the SMEs' weight up to 50% in its portfolio, and steer for project financing to reduce its contraction sector exposure. Weight of the consumer segment is expected to elevate by
200bps to 10% through housing loans. Albaraka does not plan to grow in the non-cash loans business as the bank does not find its risk-return structure feasible. Albaraka plans to limit its exposure to non-cash loans with 50% of total asset size, and this will come down to 30% in 3 years time. Currently, non-cash loans to total assets ratio hover around 55%.
Net margin is expected to come down by around 20bps on year averages. Albaraka posted 5.9% net profit share margin in its 9M 2010 financials, and anticipates to finish the year with 5.5% margin. Retail focused lending and easing blended deposit costs are expected to defend the bank's margins.
Albaraka expects a lucrative fee income growth through widening its base. Note that, Albaraka does not impose fees to major banking services, and hence growth will be built over a low base like its rival, Bank Asya.
2011 fee income growth might smoothly exceed 30% according to guidance. Opex growth seems to be a burden on profitability. Albaraka plans to open 15 new branches in 2011, and recruit around 300 personnel
some of which will be employed in the new headquarters. The bank currently has 110 branches and 2200 employee, and aims to reach to 200 branches in 5 years. All, 2011 opex growth is estimated to be 25%.
Asset quality is expected to remain intact. Albaraka's NPL ratio retreated to below 3% as of 2010YE, and is expected to ease down by 25bps in 2011. CoR, which was 113bps in 9M 2010, might also come down with loan growth. Albaraka enjoys improving past year NPL collections thanks to a recent change in regulation regarding non-residents' rights on immovable properties. Prior to the new regulation, local governors could opt to slow down the property sales of corporate with non-resident shareholders which had retarded the bank's collection process. The new regulation is effective from November 2010, and hence Albaraka could accelerate its past year NPL collections thereafter.
Total restructured loans reached to TL 200mn, and TL 118mn of this amount, or roughly 2% of total loans, corresponds to restructured NPLs. The bank guided us that all the restructured portfolio seamlessly meets its obligations.
All, Albaraka anticipates to post 17% RoAE and around 1,8% RoAA in 2011. We have not been guided with an expected EPS growth. The bank booked windfall profits from the sale of its previous headquarters building in 4Q 2010. There might be a dividend payout from 2010 earnings however the payout ratio is expected to remain low again due to the BRSA's limitations (2009 cash dividend ratio was 10%). Albaraka will most likely preserve its CAR at 13% in 2011. Meanwhile, a rights issue or a SPO might come to the table in Albaraka's BoD meeting scheduled to be held in February. Albaraka shares trade at 1.5x P/BV and 9.3x P/E on its 2011 consensus estimates, implying some 20% premium on average to its rival, Bank Asya.
Source : http://www.strateji.com.tr/scripteng/Haber.asp?v=20110118105104 - Jan 18, 2011
