In its 2Q11 financials, Bank Asya reported TRY 55mn net earnings, versus our TRY 60mn forecast and TRY 60.5mn market consensus estimates. The quarterly net earnings imply 15% growth over 1Q11, which can be explained by a sharp dive in provisioning expenses in the period, and the weak base of 1Q11. (source)
The bank's RoE jumped to 15.3% in the underlying period, showing a significant improvement over the previous quarter's figure of 9.8%. In cumulative terms, the TRY 103mn bottom line corresponds to 16% annual contraction. Following the 90bps contraction in 1Q11, the bank's NIM recovered by 50bps in 2Q11 to 4.9%. The main reason behind the positive spread evolution was the decline in funding costs in the quarter, which resulted in a 3% q/q rise in net interest income. Constrained by the business model, participation banks are unable to find funding as easily as their peers as a result of the higher deposit rates offered by conventional banks. Recall that the bank had previously guided for 50bps NM suppression for the full year. Total loans grew by 6.3% q/q, below the sector average, but higher than the participation bank average; meanwhile total funds collected grew by a mere 2% in the same time period. The loans to deposits ratio is stretched to 106% in the quarter, which we find threatening for the coming periods. We consider the results positive, with expanding margins and improving cost of risk. However, the stretched loans to deposits ratio and lower_than_expected fee income generation are still concerning for the near future. We maintain our 'Hold' recommendation for the time being.