#YKBNK Yapı Kredi for BIST:YKBNK symbol by FatihYalcinBroker


The bank’s new strategy, which has been successfully implemented, deserves all the praise. The Bank’s strategy of turning to smaller-scale retail businesses both in loans and funding structure, which was put into effect after 2015, has made a significant contribution especially in this turbulent period. We see that margins tend to strengthen structurally as a result of the reduction of large deposits and wholesale funding structure, which had a high weight before diversification by focusing on individual deposits in funding. The same table is available in credits. The increase in SME and individual loans continues to strengthen asset quality as well as contributing to profitability. In addition, with the resolution of the ownership problem, the bank’s decision taking It is also observed that the processes are also positively affected and the ability to direct the balance sheet according to the developing conditions has increased considerably. In addition to the positive steps in structural profitability and margins, we think that YKB will be one of the banks that will achieve a return on equity of 20% or more in the coming period, with the approaches developed within the framework of this strategy regarding asset quality.

We increased our profit forecast for the next three years for YKB by approximately 67%. Here are the most important factors behind the revision; i-) especially the widening loan spreads and the positive contribution of the bank’s timely TÜFEX investments (which is one of the highest among its peers in YKB’s TÜFEX portfolio), especially the positive contribution to net interest income and margins, ii-) to a structural improvement trend with the bank’s tendency towards more retail businesses and diversification. iii-) lastly, the ability of the bank to generate potential fee/commission income, especially in the area of ​​credit cards, where the bank has historically been strong, can be shown as the fact that the incoming asset quality now generates less provision expenses.

Valuation

We are increasing our target price for YKB from TL 5.8 to TL 6.7. Our target price was revised after the upward change in our sustainable return on equity assumption. According to 2022 forecasts, YKB is traded with 1.7x P/C and 0.5x F/DD multipliers. The P/E multiplier points to an 81% discount compared to its developing country peers.

Risks

The bank is exposed to the risks of asset quality deterioration and profitability volatility through the economic slowdown channel.

Soruce : https://tr.tradingview.com/chart/YKBNK/cbEQuC7k/

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