Balance Sheet Management And Digital Investments Will Support Future Stability

Key Takeaways

• Strategic balance sheet management and asset liability strategy are expected to support growth and enhance net interest margins, positively impacting earnings.
  
• Robust digital capabilities and customer acquisition drive fee income growth and profitability, while investments in technology enhance customer engagement and efficiency.
  
• Rising funding costs and economic challenges may impact net interest margins, asset quality, and overall profitability due to increased non-performing loans and ongoing volatility.

Catalysts

Provides various banking products and services in Turkey and internationally.

• Akbank's strategic balance sheet management, particularly its strong total capital position and dynamic asset liability management strategy, are expected to support future growth and enhance the net interest margin in an inflationary environment. This is likely to positively impact earnings.
  
• The bank's robust customer acquisition and digital capabilities facilitate sustained fee income growth outpacing the market, which is critical for enhancing recurring revenue streams and overall profitability.
  
• Efforts to optimize deposit costs and strategically position its loan-to-deposit ratio provide a buffering mechanism as the economic environment normalizes, thereby supporting margin resilience and net margins.
  
• Akbank's investments in digital technologies have enhanced customer engagement and risk management capabilities, providing a foundation for high-quality growth. This increases the potential for revenue expansion through improved customer experience and operational efficiency.
  
• Proactive treasury and securities portfolio management, including investment in high-yielding corporate bonds and tactical security optimization, are designed to preserve margin resilience and drive NIM evolution, positively influencing earnings.

Akbank T.A.S Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Akbank T.A.S's revenue will grow by 49.6% annually over the next 3 years.
• Analysts assume that profit margins will shrink from 29.4% today to 25.0% in 3 years time.
• Analysts expect earnings to reach TRY 122.0 billion (and earnings per share of TRY 23.1) by about May 2028, up from TRY 42.9 billion today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as TRY95.6 billion.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 7.7x on those 2028 earnings, up from 5.9x today. This future PE is greater than the current PE for the TR Banks industry at 5.6x.
• Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 29.78%, as per the Simply Wall St company report.

Akbank T.A.S Future Earnings Per Share Growth

Risks

• The evolving political landscape and monetary tightening measures have created a complex and challenging environment for the banking sector, which could increase funding costs and impact net interest margins.
  
• High funding costs, stemming from increased interest rates and possible delays in the rate cut cycle, could impact net interest income and overall profitability.
  
• The slowdown in economic growth and higher-than-expected interest rates may lead to increased non-performing loans, particularly in retail and SME sectors, impacting asset quality and potentially increasing the cost of credit.
  
• The challenge in maintaining robust net interest margins amid rising deposit and wholesale funding costs may affect earnings, especially if the margins do not improve as projected in the latter part of the year.
  
• Uncertainty in global trade policies and ongoing economic volatility, especially regarding currency fluctuations and inflation, could have adverse effects on revenue and solvency ratios.

Valuation

• The analysts have a consensus price target of TRY82.453 for Akbank T.A.S based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of TRY103.0, and the most bearish reporting a price target of just TRY56.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be TRY487.9 billion, earnings will come to TRY122.0 billion, and it would be trading on a PE ratio of 7.7x, assuming you use a discount rate of 29.8%.
  
• Given the current share price of TRY48.5, the analyst price target of TRY82.45 is 41.2% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.