Release Date: July 31, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Yapi Ve Kredi Bankasi AS (IST:YKBNK, Financial) reported a cumulative net profit of $17.4 billion with a return on tangible equity of 19.5% and return on assets of 1.7% for the first half of 2024.
- The bank has a strong customer base exceeding 16 million, with a focus on asset under management rather than free-lending, which supports long-term profitability.
- The bank's net interest margin is expected to improve, with a forecasted exit NIM of above 4.5% by the end of the year.
- Yapi Ve Kredi Bankasi AS has secured $7 billion worth of external funding within a year, strengthening its funding base for future growth.
- The bank's asset quality remains sound, with a well-covered portfolio and a collection ratio that increased by 50% compared to 2022, indicating effective collection strategies.
Negative Points
- The bank's net interest margin was at a low of 33 basis points in the first half due to higher Turkish lira funding costs and regulatory impacts.
- There is a potential for asset quality deterioration in 2025, particularly in the wholesale book, depending on the depth of market tightening.
- The bank experienced a 4 billion mark-to-market loss under equity in the quarter, driven by interest rate increases on its securities portfolio.
- Stage II loans showed a shift from regular to restructured loans, indicating some underlying stress in the loan portfolio.
- The effective tax rate for the second half is expected to be higher than the first half, potentially impacting net profitability.
Q & A Highlights
Q: What level of remuneration for the conversions have you received in the second quarter and included in your net interest margin? Also, how do you see cost of risk development into 2025?
A: We are fully eligible for reserve requirements remuneration in the second quarter, with a positive impact on the NIM close to 1%. Regarding cost of risk, we have reversals in Stage II and Stage III, mainly driven by collections. For 2025, we expect some pressure on asset quality, particularly in unsecured lending, but our portfolio remains strong.
Q: Does your fourth quarter NIM expectation include rate cuts, and how are swap costs expected to trend in the third quarter?
A: Yes, our fourth quarter NIM expectation includes anticipated rate cuts, assuming a decrease below 45% if inflation trends downward. Swap costs are expected to be around $10 billion in the third quarter, with volumes decreasing by 25-30%.
Q: Can you explain the shift from regular Stage II loans to restructured Stage II loans?
A: The shift is mainly due to lengthening maturities or repricing loans and big ticket recoveries, particularly in the construction and energy sectors. This indicates a strengthening in the Stage II portfolio rather than deterioration.
Q: What are your expectations for real TL loan growth for the rest of the year?
A: We expect real TL loan growth to be slightly above inflation levels, assuming inflation is in the low 40s. If inflation is higher, around 50-60%, we may need to revise our expectations.
Q: Are you seeing any signs of stress in your wholesale book, and how might this affect cost of risk next year?
A: We haven't seen stress in the wholesale book yet, but it could occur if market tightening continues. We expect cost of risk to be higher next year than this year, but it's difficult to predict normalized levels due to ongoing market changes.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
