Release Date: October 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) achieved a 32% quarterly increase in pre-provision profits, indicating strong top-line growth.
- The bank successfully widened its loan deposit spread by 236 basis points quarterly, outperforming peers in net interest margin contribution.
- The bank's fees coverage over operating expenses reached 98%, the highest among peers, demonstrating strong operational efficiency.
- Yapi Ve Kredi Bankasi AS maintained a solid customer base with 16.5 million customers, with more than 60% being efficient in terms of penetrated products.
- The bank secured around $7 billion worth of external funding within the last 12 months, strengthening its funding base for future growth.
Negative Points
- The bank experienced a 30% quarterly decline in net profit, reflecting challenges in the current operating environment.
- Prolonged high rate environment and macro prudential measures have delayed the expected improvement in net interest margin.
- The bank's return on tangible equity was 16.4%, which may be considered low given the challenging operating environment.
- There was a significant increase in operating costs, primarily driven by HR costs due to salary increases, impacting overall profitability.
- The bank's NPL inflow was driven by unsecured consumer loans, indicating potential risks in asset quality.
Q & A Highlights
Q: Can you elaborate on your strategy this quarter that led to loan deposit expansion, and how do you expect it to develop going into Q4 and 2025? What is the key difference of your strategy versus peers?
A: Our strategy focuses on controlling margins, particularly the loan deposit spread. We aim to lower our cost of deposits, which are currently around 230 basis points lower than the sector. Additionally, we have increased our demand deposits to 44% of our total deposit base. On the loan side, we are able to reprice our loan book more effectively than peers. Going into Q4 and 2025, the strategy will depend on the rate cut cycle and macro developments. We expect to benefit more from rate cuts, although they are not anticipated this year.
Q: How do you balance new loan pricing, which was over 400 basis points above the sector, against volume growth?
A: Lending is capped by regulatory limits, and our Turkish loan growth was lower than in previous quarters. We have been pricing loans higher than the market to optimize net interest margin, resulting in lower loan growth, which is a deliberate strategy.
Q: Based on your current projections, when do you expect to exceed the cost of equity?
A: We believe that exceeding the cost of equity will be achievable in the second half of next year, especially as the economic environment normalizes.
Q: Do you expect any stress in your foreign currency book, especially on export loans?
A: We do not expect any stress as we maintain prudent underwriting standards, with small ticket sizes and careful monitoring of sectors and their FX revenue forecasts.
Q: How do you see market conditions for potential issues of Eurobonds, and do you have any appetite for opportunistic issues of seniors or capital instruments in the near term?
A: We have no Eurobond redemptions in 2025, so there is no immediate pressure to issue. However, we would consider opportunistic issuances if favorable conditions arise.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
