Relevant Document:Isbank Nov. 6 Disclosure of TSKB Shares
Turkish lender Isbank has purchased one million additional shares in TSKB, increasing its stake in the private development bank to 41.28% according to a disclosure today.
A number of Turkish lenders have seen their booked interest income grow substantially in the past quarters, while the amount of interest collected on the cash flow statement has not followed suit. This is mainly driven by the banks holding government bonds that pay a floating rate coupon linked to the Turkish Consumer Price Index, or CPI. A high Turkish inflation has pushed the interest up on the inflation-linked notes but the lenders only clip coupons every six months which creates a widening gap between interest income accumulated in a quarter versus interest collected. Turkey's treasury recorded CPI at 25.24% and PPI at 45.01% for October.
TSKB’s cash collection rate - measured by comparing interest received as a percent of total interest income - dropped to 83.3% for the nine months ending Sept. 30 compared to 90% for the same period of 2017. Cash collection in the six month period ending June 30 this year dipped to 66.9%, compared to 92% for the same period of 2017.
A source close to the Turkish lender said that for the end-June period some cash flow items related to loans are booked under “1.1.9 Other” on the cash flow table with the misplaced number of around TRY 230 million - bringing the collection ratio up to 85%, but still below the same period in 2017.
Isbank booked TRY 18.85 billion in interest income in the first half of 2018 and collected TRY 18.45 billion, giving a cash collection ratio of 97.85%.
TSKBs $350 million 5.375% 2019 seniors have a bid/ask of 96.88/97.88 and the $350 million 5.125% 2020 seniors have a bid/ask of 94.12/95.12. The bank’s $350 million 5.5% 2023 seniors have a bid/ask of 83.88/84.88 and the $300 million 7.625% tier 2 subordinated 2027s have a bid/ask of 80.75/81.75.
Isbank’s $500 million 5.5% unsubordinated 2019s have a bid/ask of 99.8/100.8 and the $750 million 5% 2020s have a bid/ask of 96/97. The $750 million 5% 2021 unsubordinateds have a bid/ask of 89.88/90.88, the $600 million 5.5% 2022 have a bid/ask of 88.25/89.25 and the $400 million 7.85% Tier 2 2023 subordinateds have a bid/ask of 87.2/88.2. The $500 million 6.125% 2024 seniors have a bid/ask of 85.25/86.25 and the $500 million 7% 2028 subordinateds are at a bid/ask of 79.5/80.5.
Isbank is due to release third-quarter results tomorrow, Nov. 7.