• Swap Adjusted Net Interest Income: Increased by 41% on a quarterly basis.

• Clean Trading Income: Improved by 5% quarterly and 63% annually.

• Net Fee Income: Quarterly increase of 13%, annual growth of 155%.

• Total Operating Income: Increased by 15% quarterly.

• Operating Expenses: Increased by around 30% due to salary adjustments and one-off payments.

• Return on Equity (ROE): Stood at 20.5% as of the end of September.

• Loan Growth: Quarterly lending growth of 9.6%.

• TL Deposits Growth: Increased by 10.8% quarterly.

• External Liabilities: Total external dues were $8.1 billion.

• NPL Ratio: Stood at 1.9%.

• NPL Coverage Ratio: Stood at 73%.

• Capital Adequacy Ratio: 15.4% without BRSA forbearance measures.

• Common Equity Tier 1 Ratio: 12.6%.

• Warning! GuruFocus has detected 7 Warning Signs with IST:ISCTR.

Release Date: November 04, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Turkiye Is Bankasi AS (IST:ISCTR) registered a 41% quarterly increase in swap adjusted net interest income, benefiting from asset repricing while controlling funding costs.

• The bank achieved a 13% quarterly increase in net fee income, with an impressive annual growth of 155%, driven by strong performance across various fee-generating businesses.

• Asset quality indicators remained robust, with an NPL ratio of 1.9%, supported by prudent policies and strong collection performance.

• Turkiye Is Bankasi AS maintained solid capitalization levels, with a capital adequacy ratio of 15.4% and a common equity tier one ratio of 12.6%, ensuring resilience against economic adversities.

• The bank's focus on sustainable funding resulted in 62% of total funding being ESG-related, reflecting a commitment to sustainability and diversified funding sources.

Negative Points

• The ongoing pressure on funding costs and delayed rate cuts have led to a downward risk on the net interest margin guidance for 2024, with expectations not meeting the initial 4% target.

• Operating expenses increased by around 30% due to salary adjustments and one-off payments, impacting overall cost management despite being budgeted.

• High inflation and macroprudential measures have created challenges, delaying the expected margin recovery and impacting profitability.

• The bank's cost of risk is expected to increase to around 150 basis points in 2025, indicating a slight normalization as the economy cools down.

• Despite a strong performance, the bank faces challenges in maintaining margins due to high funding costs and growth caps, which limit loan repricing.

Q & A Highlights

Q: Can you provide guidance on the net interest margin (NIM) evolution into the year-end and 2025, considering the delayed rate cut expectations? A: Izlem Erdem, Deputy Chief Executive, explained that the initial guidance for a 4% NIM exit level by year-end is unlikely due to elevated funding costs and delayed rate cuts. The NIM is expected to be in the 2% to 3% range at the beginning of 2025, with potential improvement as monetary easing progresses.