Halister News

(Bloomberg) -- Current valuation is attractive since it “implicitly ignores the ongoing improvements” on Yapi Kredi’s improving asset quality and capital position, UBS analyst Cihan Saraoglu writes in report.

• Upgrades stock to buy vs. neutral, PT raised to 5.40 liras vs 4.90; implying 24% increase from Monday’s close
• Expects lender’s net specific cost of risk to improve 25bps in 2018, reducing return on equity, or ROE, differential to peers by 2pp and resulting in 14% faster earnings growth
  • Improved profitability seen supporting capital generation and keeping Yapi Kredi above fully loaded Basel-3 capital requirements
  • Expects non-performing loan sales to normalize in 2018, extra provisioning to stop and net specific cost of risk to improve to 100bps from 75bps, while peers’ cost of risk bottoms out
  • Estimates Yapi Kredi earnings to grow 23% YoY in 2018 vs 9% for peers
• Yapi Kredi trades at 4 times estimated 2018 earnings and 0.6x P/B, “too low” for only 150bps negative EVA
• Yapi Kredi shares rise as much as 2.5% after upgrade

To contact the reporter on this story: Tugce Ozsoy in Istanbul at tozsoy1@bloomberg.net To contact the editors responsible for this story: Celeste Perri at cperri@bloomberg.net Paul Jarvis