ALBRK TI: 2Q25 Review (Oyak Yatırım)

Strong fees and trading gains
Core revenues down; trading gains supportive
Albaraka posted 2Q25 net income of TL1.256mn (-84% q/q, flat y/y), in line with both our estimate (TL1.236mn) and the market consensus (TL1.263mn). Note that 1Q results were inflated by the release of free provisions (TL 7.0bn). Albaraka also set aside TL445mn in additional free provisions this quarter, bringing the total buffer to TL745mn as of 1H25. Had we excluded 1Q's reversals and adjusted for new free provisions, net income would have been TL1.7bn, doubling q/q in 2Q. Tax reversals (TL 727mn), driven by asset sales and tax exemptions on investment funds, also contributed to 2Q earnings. Core revenues declined by 18% q/q due to high funding costs, as both the core spread and TL spread contracted by 19bps and 31bps q/q, respectively. Meanwhile, fee income grew by 14% q/q and 43% y/y. Net trading income expanded by 74% q/q, mainly due to valuation gains from the Bank's own investment fund. Opex slid 17% q/q due to effective cost management and the absence of 1Q's employee bonus payments. ROE rose to 26% in 2Q, up from an adjusted 18.3% in 1Q and 34.4% in the same quarter last year. We expect Albaraka's net earnings to reach TL11.7bn (+171% y/y) in 2025, implying a strong 49% ROE.
Downgraded to MP on limited upside
Albaraka trades at 26E P/BV of 0.7x and 3.8x P/E, while 26E ROE stands at 18.7%, on our estimates. Since the beginning of 2Q, Albaraka has outperformed XBANK by 19% and XU100 by 36% (54% in absolute terms), marking the best performance among its peers. Although we remain positive on the stock, we have downgraded our rating to 'Market Perform' from 'Outperform' due to limited upside potential. We will look for better entry points going forward.


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