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Garanti Second-Quarter Profit Drops 24%, Missing Estimates

July 31 (Bloomberg) -- Turkiye Garanti Bankasi AS, Turkey’s biggest bank by market value, posted a 24 percent decline in second-quarter profit, missing estimates, as it set aside more money for souring loans.

Net income dropped to 718.5 million liras ($400 million) from 943.2 million liras in the year-earlier period, Istanbul-based Garanti said in a statement today. That was lower than the 746 million-lira average prediction of seven analyst estimates compiled by Bloomberg. Provisions rose 46 percent to 282 million liras.

“There’s an increase in provision expenses because of rising non-performing loans caused by the slowdown in the economy,” Duygun Kutucu, an analyst at EFG Istanbul Securities, said in a telephone interview today. “Other banking income also fell as there was no one-off sale of subsidiaries like last year.”

Turkey’s economic growth is forecast to cool to 2.3 percent this year from 8.5 percent in 2011, the International Monetary Fund said in April, placing pressure on households and companies. Non-performing loans will reduce profitability in the Turkish banking industry this year, Garanti’s Chief Executive Officer Ergun Ozen said at the time.

Garanti dropped 0.8 percent to 7.14 liras on the Istanbul Stock Exchange at 11:05 a.m. The average 12-month price estimate for Garanti is 7.81 liras across 23 analysts, according to data compiled by Bloomberg. Thirty-two analysts rate the stock, with 18 buys, 13 holds and one sell.

Income from fees and commissions declined 2 percent to 475.1 million liras, Garanti said. Net interest income climbed 28 percent to 1.39 billion liras and other banking income slid 77 percent to 94.3 million liras.

To contact the reporters on this story: Aydan Eksin in Istanbul at aeksin@bloomberg.net; Sibel Akbay in Istanbul at sakbay@bloomberg.net

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

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