Release Date: August 12, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Turkiye Halk Bankasi AS reported a 33.9% year-over-year increase in total assets, reaching TRY2.611 billion in the second quarter.
- The bank's NPL ratio remained stable at 1.5%, indicating strong asset quality management.
- Turkiye Halk Bankasi AS saw a significant improvement in its current account deficit, narrowing from $60 billion to approximately $25 billion.
- The bank's net fees and commissions improved by 19.4% quarterly and 127% year-on-year, surpassing inflation rates.
- The bank's CET1 ratio increased by 38 basis points compared to the previous quarter, reflecting a solid capital position.
Negative Points
- Net interest income decreased by 26.4% quarterly, impacting overall profitability.
- The bank's net income fell by 28.6% quarterly, with ROE coming in at 12.6%.
- Loan growth was limited to 2.3% quarterly, reflecting tight monetary policy and weak TL loan demand.
- The cost of funding increased due to the closing of CBRT swap lines, putting pressure on profitability.
- The bank's operating expenses increased by almost 40% year-over-year, despite efforts to manage costs.
Q & A Highlights
Q: Can you provide an overview of the Turkish economy's performance in the first half of the year?
A: The Turkish economy grew by 5.7% in the first quarter, with unemployment remaining at single-digit levels. However, economic activity began to lose momentum in the second quarter due to tightening financial conditions. We expect this cooling-down process to continue into the third quarter.
Q: How has the Central Bank of the Republic of Turkey (CBRT) adjusted its monetary policy recently?
A: The CBRT has tightened its policy framework with efficient liquidity management and restrictive credit policies. It has increased the required reserve ratio to manage excess Turkish lira liquidity and closed swap lines with domestic banks, leading to higher funding costs for the banking sector.
Q: What are the expectations for inflation and economic growth in Turkey for 2024?
A: We expect economic growth to be around 4% in 2024, aligning with the medium-term program forecast. Inflation is expected to converge to around 50% by August, with the CBRT potentially cutting rates towards the end of the year if inflation is contained.
Q: How has Halkbank's asset pricing strategy been affected by recent economic conditions?
A: Halkbank has continued asset pricing despite increased funding costs, compensating Turkish lira loan growth with rising FX loan demand. The normalization steps in regulatory measures and policy rates have created a challenging environment for loan growth.
Q: What are the key factors influencing Halkbank's profitability in the coming quarters?
A: Factors supporting profitability include the floating right exercise on cooperative loans, ongoing state saving plans, and improvements in Turkish lira core spreads. We aim to maintain a flat headline net interest margin compared to the previous year.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
