Equity / Mid Cap.

/ Banking

Bank Asya
Bloomberg: ASYAB TI
Reuters: ASYAB IS
ASYAB 1Q12 Earnings Review: "Blooming Margins
Bottom-line disregarded, outlook enhanced Fast growth in 1Q NIM back to 5% in 1Q A more CAR friendly fee base on the way NPL additions slowed down, close watch loans still high Opex remained flat CAR slightly improved
Bottom-line disregarded, outlook enhanced. Bank Asya disclosed TL 50mn net earnings in its 1Q12 solo financials, down 4% QoQ and up 4% YoY, while 6% below the Consensus estimate of TL 53mn and 10% lower than our above Consensus estimate of TL 56mn. Top-line growth was robust in 1Q12 thanks to improved NIM and resilient fee income as the accounting change in fees from loans did not influence the banks financials. Net new NPL formation exceeded our forecast. Higher than expected provision expenses due to increased loan loss coverage seems to be the main culprit behind our deviation. Despite lower than expected bottom-line, we welcome improving loan to deposit spreads and NIM in 1Q12. Bank Asya shares trading at 7.1x on 12E net earnings and 0.7x on 12E BV. Fast growth in 1Q. Total loans grew 5% QoQ whereby total deposits increased 6% QoQ driven by FX corporate deposits. Loan growth was in line with relatively firmer growth of participation banks as compared with the banking system whereas deposit growth was robust than its peers. Bank Asya also deployed c. TL 200mn of revenues from redemptions of the Treasurys revenue-sharing certificates into loans, which supported the profit margin in 1Q. Loan to deposit ratio stayed resilient at 105% in 1Q. Equally important, Bank Asyas leasing receivables increased 3% QoQ as the bank also aims at preparing itself for issuing sukuk bonds in the remaining of the year. NIM back to 5% in 1Q. Bank Asya improved its profit margin by 79bps QoQ thanks to early re-pricing of the loan book in a rising interest rate environment and flat funding costs owing to c. 200bps QoQ lowered profit sharing rates compared to 4Q11 averages and sizable demand deposit base. Blended loan to deposit spread of the bank widened a similar 78bps QoQ to 5.1% in 1Q12. Going forward, management sees stable NIM in 2Q despite some competitive pressures leading to downward pricing in some segments as deposit costs remained resilient. A more CAR friendly fee base on the way. Fee income remained flat in 1Q12 as the bank has been endeavouring to downsize its enormous noncash loan book within its RWA optimization scheme. Fees from non-cash loans came down 10% QoQ while fee income generation from traditional banking activities grew 10% QoQ in 1Q. Non-cash loans declined to TL 8.7bn from TL 9.3bn within the quarter.
Please refer to important disclaimer at the end of this report.

14/05/2012

Review of BRSA Solo 1Q12 Financials

MARKETPERFORM
Upside Potential*
Stock Data Price at 11 05 2012 12-Month Target Price Mcap (mn) Float Mcap (mn) No. of Shares Outstanding Free Float (%) Avg.Daily Volume (3M, mn) Market Data ISE 100 US$ Spot Rate US$ 12-Month Forw ard
Price Performance (%) 1 Mn

21%
US$ 0.99 1.21 896 466 900 mn 52.00

TRY 1.78 2.16 1,602 833

24.2

14.4 TRY 58,873 1.7883 1.8903

3 Mn -4 -6 -1

12 Mn -33 -41 -24

TRY US$ Relative to ISE-100

-2 -2 0

Price / Relative Price

5.0 4.0 3.0 100 2.0 1.0 ASYAB Relative to ISE 100 50 TL Relative 200 150

0.0 0 01-09 11-09 09-10 07-11 05-12

52 Week Range (Close TRY) 1.54 2.66

Bulent Sengonul
bsengonul@isyatirim.com.tr +90 212 350 25 66

Kutlug Doganay
kdoganay@isyatirim.com.tr +90 212 350 25 08

Bank Asya
The management targets to bring down the level of the non-cash loan to TL 8.3bn until the end of the year. This would be achieved by downsizing letter of guarantees and growing in other types of non-cash loans which are more frequently re-priced. The management targets high single digit net fees growth for the full year, which will be bolstered with revenues from real estate sales of its REIT subsidiary and bancassurance fees. NPL additions slowed down, close watch loans still high. Bank Asya will continue to clean its backyard in 2012. Net NPL additions decelerated from a high base in 4Q, which was inflated with a single corporate file. Gross NPLs increased 2% QoQ. NPL ratio improved 12bps QoQ to 4.5% in 1Q. However, the betterment stemmed from increased coverage and TL 30mn of write-off within the period. Coverage ratio increased to 54% in 2Q from 50% in 1Q due to aging effect. Total provision expenses soared 11% QoQ and specific CoR remained high at 227bps in 1Q. The management asserts that loan loss coverage will reach to 65% level by the end of 3Q owing to new NPL formation, though at a decelerated pace and further aging. Close watch loans still account for 7% of the total loan book. Opex remained flat. Despite 8% QoQ rise in HR-costs due to wage increases, opex remained almost flat as there were no new branch openings in 1Q12. Going forward, the management anticipates 10% opex inflation on annual basis this year with an estimated 40 new branches. On the flip side, other income fell sharply on weaker provision reversals. CAR slightly improved. Bank Asyas CAR increased to 13.65% in 1Q12 from 13.31% as end-2011 as total RWA stayed flat despite 5% QoQ loan growth thanks to improved collateralisation, decrease in non-cash loans, TLs strengthening against hard currencies and lack of dividend pay-out in 1Q.

Bank Asya
Bank-only, BRSA (TL m n) Operating income Net interest income Commission income Net trading income Other income Provision expenses Operating expense Net income Bank-only, BRSA (TL m n) Banks Loans NPLs Securities Deposits Foreign funding Repo funding Shareholders' equity Total assets Loans/Total assets Securities/Total assets Non-core assets/Total assets Fixed assets/Total assets Equity/Total assets Borrow ed funds/Total assets Gross NPL ratio Loan loss reserve ROAE ROAA NIM Adj. NIM (trading & FX) Adj. NIM (trading, FX & LLPs) Yield on IEAs Cost of f unds Spread Cost/income ratio Cost/Average assets Cost of risk, annualised
So urce: Is Investment

2010 1,022 594 249 45 134 167 530 260 2010 187 10,955 447 474 11,167 622 0 1,942 14,513 75.5% 3.3% 1.0% 2.4% 13.4% 4.3% 4.0% 68% 14.2% 2.0% 5.2% 5.6% 4.1% 10.6% 5.8% 4.8% 54.3% 4.1% 110

2011 1,061 631 260 39 131 228 563 216 2011 359 13,154 616 858 12,397 1,458 279 2,137 17,190 76.5% 5.0% 0.9% 2.6% 12.4% 8.5% 4.6% 50% 10.6% 1.4% 4.8% 5.1% 3.4% 9.7% 5.0% 4.7% 55.1% 3.6% 141

YoY 3.8% 6.3% 4.2% (13.0%) (2.7%) 36.2% 6.2% (16.9%) YoY 92.6% 20.1% 37.7% 80.9% 11.0% 134.3% n.m. 10.1% 18.4% 104bps 172bps (10bps) 20bps (94bps) 419bps 60bps (1,827bps) (365bps) (63bps) (44bps) (54bps) (79bps) (93bps) (82bps) (12bps) 88bps (51bps) 31bps

1Q11 252 144 67 13 28 61 134 48 1Q11 49 377 (6) 100 (119) 54 0 39 (7) 78.1% 4.0% 1.0% 2.5% 13.7% 4.7% 3.8% 65% 9.8% 1.3% 4.8% 5.2% 3.2% 9.6% 4.9% 4.7% 56.2% 3.7% 120

2Q11 241 150 62 9 21 32 138 55 2Q11 (139) 714 (4) (7) 234 374 263 57 1,110 77.1% 3.6% 0.9% 2.4% 13.1% 6.7% 3.5% 64% 11.0% 1.5% 4.8% 5.1% 4.1% 9.7% 5.1% 4.6% 59.3% 3.7% 81

3Q11 271 179 64 8 20 50 144 61 3Q11 42 995 54 305 595 447 395 59 1,596 75.8% 5.1% 0.9% 2.2% 12.2% 8.7% 3.7% 58% 11.7% 1.5% 5.3% 5.5% 4.0% 10.1% 4.9% 5.2% 54.8% 3.5% 116

4Q11 296 159 67 8 62 86 148 52 4Q11 220 113 125 (14) 519 (39) (378) 40 (22) 76.5% 5.0% 0.9% 2.6% 12.4% 8.5% 4.6% 50% 9.8% 1.2% 4.4% 4.6% 2.3% 9.5% 5.2% 4.3% 51.3% 3.4% 226

1Q12 304 192 66 11 35 95 146 50 1Q12 (154) 609 12 (203) 758 172 (279) 58 677 77.0% 3.7% 0.9% 2.5% 12.3% 9.1% 4.5% 54% 9.2% 1.1% 5.2% 5.5% 2.9% 10.3% 5.2% 5.1% 49.7% 3.3% 227

QoQ 2.7% 20.7% (1.1%) 30.4% (43.3%) 11.4% (1.3%) (3.8%) QoQ n.m. 436.9% (90.3%) n.m. 45.9% n.m. n.m. 44.4% n.m. 51bps (132bps) (2bps) (14bps) (15bps) 64bps (12bps)

YoY 20.5% 34.0% (1.8%) (21.0%) 24.7% 56.7% 8.6% 4.2% YoY n.m. 61.6% n.m. n.m. n.m. 221.5% n.m. 47.2% n.m. (109bps) (29bps) (12bps) (1bps) (137bps) 446bps 66bps

Increm ental changes

Increm ental changes

414bps (1,156bps) (58bps) (7bps) 79bps 85bps 65bps 78bps (3bps) 81bps (158bps) (11bps) 1bps (55bps) (18bps) 41bps 25bps (30bps) 67bps 29bps 38bps (649bps) (37bps) 107bps

ASYAB Estimated Financials Income Statement Net Profit Shares Income Net Income Balance Sheet Loans (net) Deposits Shareholders' Equity Ratios Ratios NIM ROAE Cost/Income NPL ratio Valuation metrics P/E x P/BV x

2010 594 260 10,955 11,167 1,942

2011E 631 216 13,154 12,397 2,137

2012E 726 227 14,753 13,267 2,354

2013E 816 286 17,660 15,817 2,629

2014E 947 359 20,286 19,117 2,973

6.0% 14.2% 51.9% 4.0% 6.2 0.8

5.0% 10.6% 53.1% 4.6% 7.4 0.7

5.0% 10.1% 53.8% 4.9% 7.1 0.7

4.8% 11.5% 54.5% 3.7% 5.6 0.6

4.8% 12.8% 54.0% 3.3% 4.5 0.5

Bank Asya

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