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Garanti Leads Profit Gain at Turkey Banks, Vakifbank May lag

Turkiye Garanti Bankasi AS led Turkish banks reporting earnings growth in the fourth quarter, posting an increase after pushing up interest rates on loans and earning more from inflation-linked bonds. Turkiye Vakiflar Bankasi TAO may say profit declined.

Net income at Garanti, the biggest listed bank by market value part-owned by Spain’s Banco Bilbao Vizcaya Argentaria SA, advanced an annual 13 percent to 790.5 million liras ($450 million.) Earnings were calculated according to full-year profit filed to the Istanbul Stock Exchange today minus income reported for the first nine months. Garanti was expected to earn 786.2 million liras ($447 million), the average estimate of nine analysts surveyed by Bloomberg showed. Garanti was the first Turkish bank to report fourth-quarter earnings.

“Garanti’s interest income is a little higher and so are the margins,” Bulent Sengonul, an analyst at Is Investment, Turkey’s biggest broker by trading volume, said by telephone. “The bank has benefited from the CPI-linked bonds and the re-pricing of loans is higher. There’s a strong outlook for the top line of Garanti’s balance sheet.”

Prices Lag

Garanti closed 2.4 percent higher at 6.86 liras, extending gains this year to 16 percent. While the main banking index has advanced 20 percent since Dec. 31, the ratio of price to book, at 1.38, still lags the average of 1.58 for the MSCI emerging markets banks index, which rose 14 percent this year. The ratio measures a stock’s market value to its book value.

Turkish banks charged higher rates of interest on loans to businesses and consumers in the last three months of 2011, as inflation accelerated to 10.5 percent in December from 4 percent at the end of the first quarter. Banks increasing the amount of inflation-linked bonds in their portfolios, such as Garanti, benefited more.

Interest income from loans advanced 24 percent to 6.59 billion liras in the whole of 2011, Garanti said in the filing. Revenue from trading in capital markets climbed 57 percent to 317.1 million liras, the bank said. Derivatives income almost tripled last year to 353.2 million liras, it said.

Profit Increase

Turkey’s top six listed banks probably posted an average increase in profit of 3.4 percent in the fourth quarter, with state-run Turkiye Halk Bankasi AS and Yapi & Kredi Bankasi AS also reporting a gain in earnings, estimates compiled by Bloomberg showed. Yapi Kredi, jointly owned by UniCredit SpA and Koc Holding AS, Turkey’s biggest group of companies, is the biggest riser this year on the banking index, climbing 28 percent.

Turkiye Vakiflar Bankasi TAO, a state-run bank, may report an annual 26 percent slide in net income to 288.6 million liras, faring the worst among the largest six banks, an average of seven analyst estimates showed. Vakifbank’s price-to-book ratio is 0.8, the lowest among major banks in the country.

Turkiye Is Bankasi AS, Turkey’s biggest bank by assets, and Akbank TAS, part-owned by Citigroup Inc., may also post a decline in earnings in the fourth quarter compared with the same period of 2010, according to estimates.

Banks should expand their loan books by about 16 percent this year as the economy grows, helping earnings and offsetting an expected increase in the percentage of non-performing loans in their balance sheets, said Sevgi Onur, an analyst at Global Securities in Istanbul.

“I foresee flattish net interest margins for 2012 but I think the banks still have strong fundamentals and will outperform global peers,” said Sevda Sarp at Erste Securities, a unit of Austria’s Erste Group Bank AG, which focuses on investment in central and eastern Europe. “Any weakness in their share price should be seen as a buying opportunity.”

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