Release Date: October 24, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Akbank TAS (IST:AKBNK, Financial) has maintained a strong capital position with a total capital ratio of 17.2% and a Tier 1 ratio of 14.6%, providing a solid foundation for future growth.
- The bank's active customer base has exceeded 14 million, contributing to a significant improvement in the fee to Opex ratio, which increased by 26 percentage points over seven quarters.
- Akbank TAS (IST:AKBNK) has achieved a 136% year-on-year growth in fee and commission income, significantly outpacing Opex growth and aligning with their full-year guidance.
- The bank has strategically positioned its balance sheet to benefit from a disinflationary environment, with a focus on maturity extensions and growth in FX loans.
- Akbank TAS (IST:AKBNK) has made significant market share gains in consumer loans and mortgages, with a 110 basis points increase in consumer loans and over 300 basis points in mortgages year-to-date.
Negative Points
- The bank's net income decreased by 36% year-on-year, resulting in a return on equity (ROE) of 20.2% and a return on assets (ROA) of 2% for the first nine months.
- Akbank TAS (IST:AKBNK) faces challenges in net interest margin (NIM) due to elevated funding costs and restrictions on loan growth, with a cumulative NIM of 2.2% for the first nine months.
- The bank's cost of risk is expected to normalize towards 1.5% to 2% next year, indicating potential asset quality challenges.
- There is pressure on the bank's spread and margin evolution due to tight monetary policies and competitive pressures, impacting revenue generation.
- The implementation of hyperinflation accounting from January 2025 could add operational burdens and complexities to financial reporting.
Q & A Highlights
Q: With rate cut expectations now being pushed out to next year, what are your expectations in terms of exit rates for Q4 and the margin into 2025? Also, how important is the easing of macroprudential measures for margin expansion?
A: We expect the first rate cut to occur in the new year, so there won't be any impact on Q4 net interest margin (NIM). We are seeing initial signs of NIM recovery due to improved reserve requirements and easing deposit costs. However, we likely won't meet our revised guidance, with NIM expected to exit between 2% to 3%. For 2025, the pace of recovery will depend on rate cuts and changes in macroprudential measures.
Q: Can you comment on asset quality and the outlook for cost of risk into 2025?
A: Our cost of risk is normalizing towards 1% for the full year. For next year, we expect a cost of risk between 1.5% to 2%, with most inflows coming from the retail side. The BRSA's restructuring scheme for overdue credit card receivables may impact NPL formation pace.
Q: What makes you confident that increasing SME market share won't affect asset quality during an economic slowdown?
A: We are benefiting from a lower base and using AI and machine learning for loan creation, focusing on healthy collateralization levels. Our SME loans are still below 9% of our gross loan book, allowing us to manage potential asset quality risks effectively.
Q: Why did you reduce your market share in time deposits when they might be the lowest cost funding option?
A: Marginal time deposit costs can be high, sometimes up to 50%, while offshore wholesale funding is slightly lower. We are optimizing the costly side of the deposit base and substituting it with offshore funding where possible.
Q: Regarding the implementation of inflation accounting, do you have any insights on the authorities' stance?
A: As of now, we haven't received any indication from the BRSA about another postponement. We are preparing for implementation starting January 1st. The three-year cumulative inflation criterion is likely to be met, making us subject to inflation accounting.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
