Halkbank Profit Beats Estimates After Former CEO’s Arrest

Turkiye Halk Bankasi AS (HALKB) reported full-year profit that beat estimates, two months after the Turkish lender’s chief executive officer was arrested amid a corruption probe.

Net income rose to 2.75 billion liras ($1.3 billion) from 2.6 billion liras in 2012, the Istanbul-based lender said in a stock exchange filing today. That beat the 2.7 billion-lira estimate of 22 analysts surveyed by Bloomberg.

Halkbank stock has dropped 24 percent in Istanbul trading since former CEO Suleyman Aslan was arrested on Dec. 17 after police found $4.5 million in shoe boxes at his home. His lawyer has said the money was charitable donations Aslan had gathered to build Islamic schools in Turkey and Macedonia. Aslan is awaiting trial.

Ali Fuat Taskesenlioglu, who was named CEO earlier this month, made no mention of his predecessor in yesterday’s statement. Instead, he commented on how Halkbank will work toward Turkey’s “2023 vision” by supporting the import and export activities of small and medium-sized Turkish companies. The year 2023 is the 100th anniversary of the founding of the Turkish Republic and is a symbolic date for Prime Minister Recep Tayyip Erdogan’s Justice and Development party.

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Halkbank fell 0.4 percent to 11.95 liras as of 3:16 p.m. in Istanbul trading.

“While earnings exceeded our forecast, the quality was weak,” Duygun Kutucu, an analyst at Burgan Yatirim Menkul Degerler AS, said in an e-mailed report. “The decline in the loan-deposit spread and the below-sector fee growth signify a mediocre operating performance.”

Halkbank’s cost of deposits in the fourth quarter increased 50 basis points to 4.8 percent from the third quarter, its earnings presentation showed. The yield it receives on loans remained at 9.4 percent, down from 11.3 percent in the year-earlier period. The lender’s loan-to-deposit ratio was 84 percent, which Elvan Oztabak, head of investor relations, described as a “comfortable level” compared with the industry average of 111 percent.

Deputy General Manager Mehmet Hakan Atilla said on a conference call with reporters the bank hired three external auditors to review its transactions and compliance procedures. “None of them submitted any negative findings or notices,” he said.

Halkbank’s fourth-quarter net income was 741 million liras, little changed from a year-earlier and beating the 682 million-lira mean estimate of 17 analysts surveyed by Bloomberg. Earnings have been better than analysts’ estimates for at least the past eight quarters.

To contact the reporter on this story: Isobel Finkel in Istanbul at ifinkel1@bloomberg.net

To contact the editor responsible for this story: Dale Crofts at dcrofts@bloomberg.net

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