20180709-法国巴黎银行-Turkish_banks_are_still_a_Buy_7页_848kb

Summary of Document: Turkish Banks are Still a Buy

Core Content

This document is a market commentary recommending the purchase of Turkish bank bonds, specifically ISCTR $ 5% 21, VAKBN $ 5.625% 22, and YKBNK $ 4% 20, as well as Subordinated issues of AKBANK and GARAN. It highlights the current market dynamics and provides a rationale for the recommendation based on yield differentials and market outlook.

Main Views and Key Information

1. Market Performance of Senior Paper

• Since the last recommendation on 22 June 2018, the short end of Senior paper has performed well.
• However, Turkish banks have lagged behind the Sovereign curve rally in recent weeks.
• The short-end of the Sovereign curve has tightened by around 30 basis points (bp), while Banks' Senior paper has only tightened by c.10-20 bp.
• The differential between Sovereign and Bank Senior paper remains up to 100 bp above its historical average, suggesting a positive market backdrop for bank bonds.

2. Recommendation for Subordinated Issues

• Subordinated issues of Turkish banks continue to lag behind both Sovereign and Senior bonds.
• Despite this, the spread between Subordinated and Senior paper is at historical highs of c.300 bp.
• The yield on the mentioned Subordinated bonds is c.8.5%, which the author believes overstates the risks such as margin deterioration, asset quality concerns, and capitalisation pressures.
• The author recommends buying these Subordinated issues due to their value proposition.

3. Recommended Bonds

• Senior Paper Recommendations:
  • ISCTR $ 5% 21
  • VAKBN $ 5.625% 22
  • YKBNK $ 4% 20
• Subordinated Paper Recommendations:
  • AKBANK $ 7.2% 27 Sub
  • AKBANK $ 6.797% 28 Sub
  • GARAN $ 6.125% 27 Sub

4. Legal and Regulatory Disclaimers

• The document is not a research report but a market commentary.
• It is intended for Professional Clients and Eligible Counterparties under MiFID II and other regulatory frameworks.
• No investment, financial, legal, or tax advice is provided.
• The views expressed are not objective and may differ from those of the BNPP Research Department.
• BNPP may have proprietary positions and trading strategies that are inconsistent with the recommendations.
• Sales and Trading personnel are indirectly compensated based on transaction volumes.
• The information is based on estimates and historical data, and not guaranteed for future performance.
• Reproduction or distribution to third parties is prohibited without prior consent.

Key Takeaways

• The differential between Sovereign and Bank bonds remains elevated, indicating potential for value in bank bonds.
• The author believes the yield on Subordinated issues overstates the risk, suggesting attractive investment opportunities.
• The recommendation is reiterated due to the positive market backdrop.
• The document includes detailed legal disclaimers for various jurisdictions, emphasizing that no advice is given and no liability is accepted for any losses arising from reliance on the content.

Conclusion

The commentary recommends buying Turkish bank bonds, both Senior and Subordinated, due to favorable yield differentials and positive market expectations. It is important to note that the document is not a research report and does not provide investment advice, with legal and regulatory disclaimers in place for multiple regions.