Turkish banks may report higher profits

Bloomberg

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Turkish Ekonomy Bank, known as TEB, said late Tuesday net income rose 22 percent to 84.2 million Turkish Liras ($54 million), more than double the average estimate of 34 million liras in a Bloomberg survey of four analysts. TEB surged 8.3 percent to a seven-month high of 1.04 liras at 3:00 p.m. yesterday.

Profits in the Turkish banking industry rose in March from a year earlier and the trend is expected to continue in the second quarter, chief banking regulator Tevfik Bilgin said in an interview last week. Turkish banks are due to report first-quarter earnings by May 15, according to stock exchange rules.

"The sector’s strong earnings performance can be put down to a combination of declining interest rates," Sevda Sarp, an analyst at Ata Invest in Istanbul, said in an e-mailed report to investors yesterday. "We expect banks under our coverage to post strong P&L performance and believe some could even beat our estimates at the bottom line."

"First quarter results will be strong as the recent sharp kuts in Central Bank rates will lead to an immediate re-pricing of liabilities boosting net interest margin and bottom-line profitability," wrote Bertrand Veraghaenne, an analyst at TEB Securities in Istanbul. "This effect will even probably carry well into the second quarter."

First-quarter profit at Asya Katılım, an Islamic participation bank, surged 41 percent to 52.7 million liras as revenue from loans and trading grew, the bank said late Tuesday. That beat the 46 million-lira average estimate of four analysts surveyed by Bloomberg. Asya rose 4.5 percent yesterday and was trading at 1.63 liras at 3:00 p.m. yesterday.

Garanti Bankası, co-owned by General Electric, may say profit in the three months to March increased a yearly 26 percent to 572 million liras, according to the average estimate of six analysts surveyed by Bloomberg. Garanti is due to report earnings today.

The Turkish Central Bank lowered the benchmark interest rate by 4.5 percentage points to 10.5 percent in the first quarter, increasing bank’s profits from trading in bonds and encouraging lending. The economy shrank 6.2 percent in the fourth quarter, the first contraction since a banking crisis in 2001. İşbank, the biggest non-government bank, may say profit was 556 million liras in the first quarter compared with 555 million liras last year, according to the average estimate of six analysts. İşbank is due to report on May 8.

Yapı ve Kredi Bankası, co-owned by UniCredit, Akbank and state-run Vakıfbank are also among lenders set to release earnings by the May 15 deadline.