TÜRKIYE VAKIFLAR BAN

VAKBN
Cours en clôture BORSA ISTANBUL - 00:00:00 30/01/2023
9.470 TRY -2.57%

Transcript : Türkiye Vakiflar Bankasi Türk Anonim Ortakligi, H1 2022 Earnings Call, Aug 08, 2022

08/08/2022 | 17:30

Presentation Operator Message
Operator (Operator)

Ladies and gentlemen welcome to the VakifBank Second Quarter 2022 Earnings Results Conference Call and Webcast. Thank you very much for standing by. There'll be a Q&A session following the presentation by the speakers. [Operator Instructions]

And with that, I will now hand you over to your host, Mr. Ali Tahan. He's the Head of International Banking and Investor Relations at VakifBank. Mr. Tahan, the floor is yours, sir.

Presenter Speech
Ali Tahan (Executives)

Thank you. Thank you very much. Good afternoon, everybody, and welcome to the First Half 2022 VakifBank Earnings Presentation Conference Call. As usual, we will spend a quick period for the presentation part. And to the extent possible, leave more time for the Q&A.

Starting with the net income in this quarter, VakifBank delivered more than TRY 7 billion quarterly net income which brought first half net profit number to slightly above than TRY 10 billion. And this TRY 10 billion net income in the first half of average ROAE came at 30%. And more importantly, this quarter, in second quarter only, we also set a fact additional TRY 2 billion.

As you know, so far, we had TRY 2 billion pre-provision in our balance sheet. And on top of that, in this quarter, we had additional TRY 2 billion more free provisioning. And adjusted debt free provisioning, our quarterly net income would be going up to TRY 9 billion from TRY 7 billion. And first half net income number would be TRY 12.2 billion with also additional pre-provision except in the first quarter.

It just a bit difficult free provisioning, as you can see in the right-hand side above chart, our adjusted average ROAE in the first half of the year would be even higher at 27%.

On top of the net income, this quarter, we also had additional coverage ratio increases. Our NPL coverage ratio remained the most -- the highest NPL cash coverage ratio in the peer group with almost 80% cash coverage ratio. On top of that Stage II coverage ratio also further increased to 18.3% from 18.2% a quarter ago. And as a result of that, total NPL coverage ratio came at all-time high level, which is 160, which corresponds to 36 percentage point increase compared to same term of the previous year.

On the next slide, we can see the important highlights for second quarter. We already discussed about the profitability part. Apart from that, we also have a solid net interest margin performance. Our net interest margin expanded by 220 basis points to 5% in the first half of 2022, which was only 2.8% in the entire year of 2021, and Swap adjusted net interest margin in the same period also increased even further by 291 basis points to 4.67%, which was 1.76% in the previous year.

And in terms of the quarter net interest margin, reported net interest margin expanded by 160 and came at 5.77%. And swap adjusted quarterly net interest margin increased by 190, came at 5.6%, which was 3.7% in the previous quarter.

During this quarter, of course, CPI linkers contributed a lot to such a big increase in net interest margin. This quarter, we received TRY 12.7 billion interest income from our CPI linker portfolio. And on top of that, we also had additional 54 basis points improvement in our Turkish lira cost of breads.

Apart from net interest margin side, fee income generation capacity of the bank was also very robust. We more than doubled our fee income and annual fee income growth came at 114% almost. And at the same time, quarterly fee income growth came at 37.2%. And as a result of such eye-catching fee income revenue generation capacity, all fee-related KPIs like, for example, fee to OpEx further improved and came at 60%, which was 47% in the entire year of 2021.

In terms of the lending, again, we were selective. We were growing mainly on the Turkish lira side. Our Turkish lira loans are up by 16% Q-on-Q and 48% year-over-year.

And on the FX lending side, we see contraction in real terms, which is also in line with our guidance. In the first half of the year, we have around 6.2% contraction in our FX lending in the auto loans. In terms of the coverage, apart from free provisioning, we also delivered all-time high total NPL coverage ratio with 160% ratio. We see both increase in Stage II coverage as well as NPL coverage and is 160% total NPL coverage ratio as well as this TRY 4 billion free provisioning, those numbers represent all-time high NPL coverage ratio and all-time high free provisioning amount.

And plus point in terms of the highlights is related to and liquidity levels, both in terms of total liquidity as well as from hard currency liquidity point of view, we continue to maintain comfortable liquidity ratios. Total LCR came at 195% versus minimum threshold of 100% and hard currency LCR ratio came at 353% versus a regulatory threshold of 80%. And for the long-term liquidity, net stable funding ratio also came strong at 117% versus BRSA requirement of 100.

On Page 4, you can see the P&L details, both on cumulative as well as quarterly basis. And the most eye-catching point is the additional accelerated amount of free provisioning in this quarter, we doubled from TRY 2 billion to TRY 4 billion in just 1 quarter period of time.

The next page is related to net interest margin. We just discussed about net interest margin growth, both reported price as well as swap adjusted net interest margin wise. On the left-hand side below chart, you can see the CPI estimate and CPI numbers. In the second quarter, we just revised our October to October CPI estimate number to 58%, which was 40% a quarter ago. And therefore, as a result of this correction, our interest income from CPI portfolio increased dramatically from TRY 5.4 billion quarter ago to almost TRY 13 billion in just second quarter.

And our CPI amount also increased during the second quarter from TRY 85 billion amount to TRY 97 billion amount. And more importantly, CPI linkers reached 120% of our shareholder equity, which is one of the highest in the peer group average banks.

At the right-hand side, you can also see the total money market funding. Our quarterly average total money market funding was flattish compared to a quarter ago, which is hovering around TRY 119 billion. And the cost of this money market funding more or less was also flattish for around 14% earlier, let's say.

But you can see a relatively dramatic decline in the average swap usage. Average swap usage in this quarter contracted to less than TRY 16 million which was about TRY 32 billion a quarter ago. And as a result of such decline in the swap usage -- swap cost in our P&L also decreased significantly from above TRY 1 billion to TRY 460 million.

Next page is related to fee income. I mean we have more than doubled fee income growth in the first half of the year compared to same term of the previous year. And quarterly, we also have around 37% increase in our fee income. In terms of the fee income breakdown, 44% of our total fee income is coming from lending activity, around 19% coming from noncash lending activity, around 25% is coming from payment systems, and the remaining part is coming from insurance and other banking transactions.

And in terms of the quarterly growth this quarter, payment systems seems to be having relatively bigger increase compared to other types of fees. We have around 45% increase in our fee income coming from payment side. And as we discussed, as a result of such very strong fee income generation, our fee to OpEx ratio came even strongly at 60% in the first half of the year.

Next page is related to OpEx. Our OpEx continued to be under control in a very disciplined way. In the first half of the year, we have lower than headline inflation OpEx growth. Our OpEx growth on a cumulative basis increased by 58% and combined with also a very strong revenue generation capacity, driven by both net interest income as well as fee income, which constitute the overall core banking revenues.

We see further contraction in our cost-to-income ratio. For the first time, our cost-to-income ratio came lower than 20% area in the quarter as well as in the first half of the year. This is another unique part of this specific period. This less than 20% cost-to-income ratio seems to be also a first case in our financials.

In terms of the breakdown of OpEx, we have relatively bigger increase in our HR cost with 65%, still lower than inflation, and we have around 52% increase in our non-HR cost.

On the next page, Page 8, you can see the lending growth. This quarter, total lending growth came at 13%, which is slightly lower than the sector's growth of 14%. And in terms of the currency breakdown, in this quarter, all lending came from Turkish lira side. We have 16% Turkish lira lending growth. And in line with the guidance, we have a 5.2% contraction in quarterly terms. And leading to Turkish lira lending side, Retail lending was relatively muted this quarter -- relatively stronger this quarter, sorry. In this quarter, we see around 23% quarterly growth in our retail portfolio coming from both GPL as well as mortgage business.

On the non-retail side, we have 10% to 11% growth on both corporate and commercial lending as well as SME lending. And in terms of the ranking, similar to [indiscernible] almost 12% market share, we are having either second or third ranking in the overall lending activity in Turkey.

On Page 9, you can see also detailed information related to segmental breakdown of cash lending as we had a breakdown of FX loans. There is not much difference compared to previous terms. This is pretty stable. And more importantly, although CGF portfolio continued to decline, overall CGF outstanding balance came even lower than TRY 32 billion, which was almost TRY 44 billion in the beginning of the year. So CGF portfolio, each and every day, is constituting a relatively small part of our total loan portfolio.

And at the right-hand side below chart, you can also see the segmental breakdown of CGF loans between SME, commercial, retail and corporate. And more than 50% of our CGF loans are extended to our SME clients as the main target area.

Next page is related to asset quality. This quarter, we also have around TRY 1.4 billion NPL write-off mid 100% coverage without creating any negative impact. But despite this NPL write-off, still, we see additional increase in our NPL cash coverage ratio. Combined both of these write-offs as well as NPL collections as well as the denominator effect, NPL ratio further came down to 2.6%, which was almost 2.9% a quarter ago.

And in terms of Stage II ratios as a percentage of total loan also came down to 9.5% area, which was slightly above the 10%. Similar to NPL portfolio, we also had additional coverage increase for Stage II portfolio.

And as a result of that, as a reflection of our consolidated provisioning policy also, our net cost of risk in the quarter came above down 200 basis points, which brought also first half net cost of risk ratio to 235 basis points. And this 235 basis points net cost of risk is dramatically higher than what we were guiding in the beginning of the year, which is 150 basis points. And this gap between the guidance versus realized net cost of risk in the first half is clearly a function of our conservative provisioning policy.

Page 11 is related to deposit side as the main funding channel. In this quarter, we have around 15% quarterly deposit growth which is slightly higher than the sector deposit growth of 14%. We have almost around 12% Turkish Lira deposit growth. And more importantly, contrary to sector, because when we look at the sector data, we see slight contraction in real terms in terms of FX deposit, but this was not the case in our deposit accounts.

Our hard currency deposits are also up by 4.3% in just 1 quarter period of time. And as of June, as of second quarter of the 2022, FX index deposits at VakifBank reached to TRY 130 billion, similar to our leading market share position in total deposit market. We are also one of the biggest actors on those newly introduced FX-index deposit products.

And in terms of the composition between demand and term around 1/4 of our total deposit now is coming from demand while the remaining 75% roughly is coming from term deposit. And previously composition of total deposits between demand and term.

On the next page, you can see also external funding details. In the second quarter, we had a very successful syndication loan with the amount of $1 billion. We had above 100% rollover ratio in terms of the renewal of the syndication loan of the previous year. Similar to last year, it was also a new ESG-linked syndication model.

And on top of that since the beginning of the year, we also obtained around $600 million fresh external funding which are mainly coming from either post financing or bilateral loans or prior placements under our GMTN programme. And in the upcoming period, we have a short-term debt reduction of $4.7 billion. And as of today, including Eurobonds, which are freely circulated. We have around $7 billion hard currency liquidity which corresponds to almost 1.5x coverage compared to our upcoming [indiscernible] within a year period of time.

And as we discussed, we are also extremely comfortable from LCR point of view, both LCR, hard currency LCR as well as from net stable funding ratio point of view, we are comfortably above the regulatory minimums, both on the LCR side as well as on the net stable funding side.

The last page, and this is the last page, I will be touching in detail. The other parts will be appendix, and I will not go through those pages just to provide more time for the Q&A. The last page I would like to mention is related to capital. Our Tier 2 capital this quarter came down to 15.55% area, which was 17.50% a quarter ago and in line with this contraction in Tier 2 ratio, we see similar contraction in our CET1 and Tier 1 ratios.

Our Tier 1 and CET1 ratios materialized at 13.7% and 11.4% respectively as of June. Of course, these are reported solvency ratios, excluding the BRSA forbearance measures, as you can see at the right-hand side, our solvency ratio starting with Tier 2 ratio will be 14.4%, 12.5% and 10.4% ratio, respectively. All those numbers indicate relatively comfortable solvency ratios for us.

At the below chart, you can see also the either positive or negative point that affect our solvency ratio evolution on a quarterly basis.

Of course, from first quarter to second quarter, the biggest reason behind such decline in our solvency ratios are related to currency effect as we can see the depreciation of Turkish lira during 2 quarters resulted more than 320 basis points decline in our solvency ratio.

For the sake of the time, I would like to stop here and leave the floor to operator again to [indiscernible] on a Q&A session. Thank you very much for your patience and interest.

Question and Answer Operator Message
Operator (Operator)

[Operator Instructions] All right. Mr. Tahan. We don't seem to be having any questions. If you would like to move into the written questions, that would be great. Thank you.

Answer
Ali Tahan (Executives)

Thank you very much. I think at the moment, we also have another conference call held by one of the private banks of Turkey and because of this conflict, maybe people just couldn't manage to participate to board often at the same time.

As far as I see, we don't also have any written question. We are at your disposal. I mean, if anybody has any follow-up question, we are available all the time, via e-mail or via call. But given this conflict with the other private banks, maybe we should -- actually for -- Bob, we only have one written question.

Question and Answer Operator Message
Operator (Operator)

We have an audio question, Mr. Tahan. We have an audio question. It's come through from Valentina Stoykova from Barclays.

Question
Valentina Stoykova (Analysts)

Congratulations on the good results. I have just one question, a very quick question on the way that you're planning to address your short-term FX maturities because you have quite a few syndications and also some subs coming due by the end of the year and also a senior due early next year in January. So I was just wondering what are your plans to address these short-term maturities? And also if you can give us a little bit of more detail with regards to your FX liquidity position as well, a breakdown. If possible, that will also be great. I'm just trying to see how much of this FX liquidity is held outside Turkey.

Answer
Ali Tahan (Executives)

Thank you, Valentina. Let me first start with the upcoming debt within a year period of time, which is in total $4.7 billion. Out of this, we have around $1.6 billion syndication. One of them will be due in November and the other one will be paid in April 2023.

Apart from this $1.6 billion syndication, as you truly pointed out, we have around $900 million Tier 2 in November. And on top of that, we have around $650 million Eurobond redemption in the beginning of next year. So of course, some part of this Tier 2 is Basel III compatible, which is subject to also regulatory approval. We haven't decided yet what -- in terms of our planning, but within the amount of September, we will discuss internally. And if we are okay to proceed with call option, we will be applying for regulators. And in case we also obtained greenlight from the regulators, we will announce our call option announcement on a timely manner. But with the deadline of first of October.

This part is unknown. But in terms of the overall Eurobond issuance, I mean, at the moment, current indicative levels for a public deal seems to be relatively costly. And on top of that, given the level of hard currency liquidity at the moment, our appetite for a fresh Eurobond issuance, almost zero at this stage because it doesn't make sense from cost management point of view and net interest margin point of view. At the end of the day, we don't have such high yield asset in our balance sheet.

So Eurobond market because of the indicative pricing levels and secondary levels, it doesn't sound realistic for the time being. So therefore, we will pay all our upcoming debt in a timely manner. But at this stage, I think there is more potential window at least on the DCM side.

But even in such scenario, we are still comfortable. We have enough liquidity to cover all our upcoming debt without any difficulty. And out of this free liquidity, around $7 billion, around $4.3 billion is coming from Eurobond portfolio, which can be eligible to sale at any time.

Apart from that, we also have around $1.2 billion liquidity parked at [indiscernible] including rightway swaps. And the remaining parts are coming from cash liquidity gold and liquidity we have in different accounts. And I believe those detailed breakdown also provides a sufficient answer to your question.

Question and Answer Operator Message
Operator (Operator)

All right, Valentina, anything else you'd like to ask?

Question
Valentina Stoykova (Analysts)

Any update on your guidance until the end of the year? Are you changing anything on that front?

Answer
Ali Tahan (Executives)

Can you repeat the question again?

Question
Valentina Stoykova (Analysts)

Yes, it's on your guidance until the end of the year, whether you are changing anything on your guidance?

Answer
Ali Tahan (Executives)

Thank you very much for this question, Valentina. Actually, compared to our guidance in the beginning of the year, some portion seems to be updated, indeed. In terms of the growth, there is no change to change. There is no need to change our guidance in terms of both TL lending and hard currency lending.

Just to remind you, in terms of the lending, we were guiding our Turkish lira lending to be in line with the sector without losing or gaining any market share in the competition. And for the hard currency lending part, we were guiding shrinkage in dollar terms. And so far, this was also evolving in line with our guidance [indiscernible].

In the lending side, I think there is no need to change the guidance. However, especially for the P&L items, starting with the net interest margin, fee income, OpEx and ROEA, we need to revise our full year guidance.

For the swap adjusted net interest margin, I think we should take the first half numbers, which is 4.7% as the new realistic expectation for the full year, net interest margin, total adjust net interest margin, even though there will be still additional upside potential from CPI linkers. Just to be on conservative side, at this stage, we believe the first half net interest margin, swap adjusted net interest margin should be expected for the average of entire year of 2022.

On the fee income side, we were starting to the year with 20% growth. In the first half of the year, it came above than 100%. For the full year of 2022, we expect our fee income to be slightly lower than 100% LSA. And on the OpEx side, we were guiding above than CPI, I think we should not change it, we should keep it unchanged.

And for the average ROEA, we were guiding high teens in the beginning of the year. But in the first half, we delivered 30%. And realistically speaking, this 30% average ROEA in the first half should also be expected for the full year of 2022.

So just to summarize, in terms of the guidance, we don't change our guidance for Turkish lira lending, hard currency lending and OpEx growth. However, we are changing positively our swap adjusted net interest margin, our fee income growth and our average ROEA.

The last point I forgot, also related to net cost of risk. In the beginning of the year, we were guiding 150 basis points net cost of risk. But in the first half, it came 235 basis points. Similar to net interest margin and average ROEA, relatively speaking, we believe the first half number, which is 235 should be taken as the new realistic expectation for the entire year of 2022.

So at this stage, I think this year will also be a very interesting and unique year in terms of net cost of risk because to my understanding and to my memory, there is no such year where net cost of risk came above than 200 basis points. But because of our conservative provisioning policy, I think this year, a realistic expectation for the net cost of risk should be hovering around the numbers what we delivered in the first half of the year, which is 235 basis points.

I think these are also the details of our guidance for the rest of the year, Valentina.

Question and Answer Operator Message
Operator (Operator)

Thank you, Mr. Tahan. Valentina, anything else?

Question
Valentina Stoykova (Analysts)

That's great. Thank you very much.

Question and Answer Operator Message
Operator (Operator)

All right. Thank you. Mr. Tahan, we don't seem to have any more audio questions. So if you'd like to move on to the next step.

Answer
Ali Tahan (Executives)

Sure. At this stage, Nihan, Head of Investor Relations, will read the questions, and I will try to answer them.

Answer
Zeynep Nihan DINCEL (Executives)

Thank you, Ali. We have one online question from Daniel from JPMorgan. Could you please provide any guidance on the rollover ratio of FX protected deposits by corporates, which are maturing in August?

Answer
Ali Tahan (Executives)

Thank you very much for this question. I think in terms of the rollover ratios, we should breakdown between retail and corporate. We have a much higher rollover ratio for the retail part because of relatively bigger yield and because of the attractive part of the product from retail customer point of view. We have a very strong rollover ratio for the retail portfolio.

We have relatively lower rollover ratio for the corporate. It is not because they have different reasons, but it is simply because of their need for hard currency liquidity, maybe because of the import payments or maybe because of the upcoming debt, et cetera.

So compared to retail, for the corporate part, we have relatively lower rollover ratio. But still, overall, net-net, combining both retail and corporate, we can say in average, we are having around 70% rollover ratio for this product in general.

And I think that will also the end of written questions. And it seems there is no further question. At this stage, I would like to thank to everybody for participating to our conference call and [indiscernible]. And as I mentioned, we are at your disposal. If you have any need, you can reach us via e-mail or via call. To the extend possible, we will be answering your questions all the time. With this occasion, I would like to thank you, everybody and say have a good evening in this summer evening.

Question and Answer Operator Message
Operator (Operator)

Thank you, Mr. Tahan. Thank you very much for your presentation. And ladies and gentlemen, this concludes today's webcast call. Thank you very much. You may now disconnect.

© S&P Capital IQ 2023
Copier lien
Toute l'actualité sur TÜRKIYE VAKIFLAR BANKASI TÜRK ANONIM ORTAKLIGI
2022
2022
2022
2022
2022