THURSDAY, March 28, 2024
nationthailand

Banking Sector

Banking Sector

5M14 loan very slim. Hope dwells in 2H14 Rec : NEUTRAL

Banking sector

There is nothing much to hope for from 1H14 loan growth which has
decelerated as a result of decreasing loan demands during the
economic downtrend and the banks’ strict loan policy. Benefits from
stimulus packages will become apparent in 2H14.

- Weak loan growth in 5M14
Ten commercial banks under our coverage reported May Summary
Statement of Assets and Liabilities with outstanding net loan (after
allowance for doubtful accounts) of B9.0tr, up only 0.38% from last month
(mom) yet growing 7.71%yoy. Overall, 5M14 net loan increased only
0.96% from end-2013, quite low when compared with FY2014 net loan
growth forecast of 6.26%yoy. The decline in May loan stemmed from
decreasing demands for retail loans after the school semester has started as
well as lower investments, both private and government, and domestic
consumption as a result of the protracted political conflicts. Monthly net loan
of small banks like KKP, TISCO, and TCAP, as well as BAY, which focus
mainly on retail loans, has decreased, whereas TMB and KBANK posted the
highest loan growth in the month, thanks to corporate and medium-sized
SME loans. Speaking of deposits (including loans for small banks),
outstanding deposit in May was B9.76tr, contracting 0.55% mom but rising
5.29%yoy, led by TCAP because of an increase in negotiable certificate of
deposit (NCD).
- Better business outlook in 2H14
We do not expect for the growth in 1H14 but foresee a better business
outlook in 2H14 throughout 2015, which would help boost 2014-2015 net
loan growth above our target of 6.26%yoy and 7.45%yoy, respectively, and
2014-2015 net profit growth above our conservative estimate of 2.4%yoy
and 8.9%yoy, respectively.
- Top picks are KBANK, SCB, KKP
We assign NEUTRAL for the sector. Top picks are SCB, KBANK, and KKP
which focus mainly on SME and retail loans and would benefit from the
recovering economy.

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