HALKB TI: 3Q22 Review (Oyak Yatırım)



Top-line grows; ROE rises

Core revenues expand; fees strong
Halkbank posted 3Q22 net income of TL4,304mn (+67% q/q, +4570% y/y), slightly above both market consensus (TL4,046mn); yet in line with our estimate (TL4,163mn). Core revenues (NII + fees) grew %81 q/q on higher CPI-linker income and strong fees, despite contracted core spread (-33bp q/q, OYAKe: -32bp) on higher deposit costs. Fees rose 115% y/y thanks to growing loans, payment system contribution and dissipating regulatory pressures, while opex expanded above headline inflation by 110%. Net total CoR rose to 796bp this quarter (2Q: 452bp) on intact asset quality and increase in provisions for all loan stages across the board. Reported ROE hiked to 24.2% in 3Q from 15.8% in 2Q and 0.9% a year ago. We expect 4Q to be strong for Halkbank as the bank has room to expand its securities yield further through high CPI.

NIM widens on higher linker yields; loans grow further
TL spread remained flat q/q (OYAKe: +27bp), while FX spread went down 1ppt q/q. Reflecting this and higher CPI revenues, NIM expanded 3.6ppt q/q (OYAKe: +3.7ppt). Halkbank increased its CPI expectation for December to 60% from 40% in 2Q. Halkbank gained market share in TL loans and TL deposits in 3Q. TL loans grew 14.7% q/q vs +12.3% for state banks (SBs), while TL deposits expanded 32.2% q/q vs +22.8% for SBs. On FX (USD) side, loans went down 5.5% q/q vs -4.5% for SBs, deposits came down 0.2% vs +5.9% for SBs.

Asset quality appears good; further provisions are set aside
NPL ratio went down to 2.6% (-21bp q/q) and the ratio of stage 2 to total loans dropped to 7.4% in 3Q from 8.8% in 2Q. Stage 2 coverage rose to 32.0% in 3Q from 22.4% in 2Q. NPL coverage, on the other hand, rose to 79% (+6 ppt q/q).
FY22-23E earnings and MP rating maintained

We foresee Halkbank's 2022E earnings to grow to TL17bn from TL1.5bn, while contracting by 18% in 2023 to TL14bn, assuming that inflation retreats and linker yields drop in 2023. Halkbank trades attractively at 23E P/BV of 0.5x and 3.2x P/E, while 23E ROE stands at 16%.

We maintain our Marketperform rating for the stock with a TP of TL10.27 per share.