Analysts keep ‘buy’ on BBL
MOST ANALYSTS are maintaining a ‘buy’ recommendation on Bangkok Bank (BBL) stock, as the bank has opted for caution in setting its financial targets, taking into account the loans made to risk-profile customers.
BBL president Chartsiri Sophon-panich told a meeting of analysts on Wednesday that the bank would carefully consider whether to provide a bank guarantee to Jasmine International, whose Jas unit was one of the two winners in December’s 900MHz cellular-licence auction.
However, the bank has expressed concern over the high prices paid to win the licences, according to research by LH Securities.
BBL and another five banks will on Tuesday sign a letter of guarantee for the 900MHz licence awarded to True Move H Universal Communication, the other winner in the auction.
According to KGI Securities (Thailand) research, the bank guarantee for Jasmine International will be considered based on the winner’s long-term business plans.
BBL stock prices have recently plunged due to its engagement with risk-profile borrowers in the digital-TV sector.
Broadcasters Thai TV and CTH are both customers of the bank.
In regard to Thai TV, Chartsiri explained to analysts that the case was currently in the court process and it was expected to be more than a year before a conclusion could be reached.
Thai TV lodged a land plot as collateral with BBL in connection with the bank issuing a letter of guarantee, with the value of the collateral accounting for 70 per cent of its total borrowing from the bank.
Capital Nomura Securities noted in its research that the worst case in relation to Thai TV was that BBL would have to pay the full amount of Bt1.634 billion to the broadcasting regulator and that Thai TV failed to repay its debt to the bank, thus becoming a non-performing loan (NPL).
In such a scenario, BBL would have to set aside a loan-loss provision of Bt1.634 billion, which would cut its net profit by 3.4 per cent from the Bt36.638 billion currently estimated for this year by the securities house.
As to CTH’s situation, Capital Nomura believes the company’s case will not adversely affect BBL even though it is in debt with the bank to the tune of Bt14 billion, as CTH major shareholder Wichai Thongtang is ready to increase the company’s capital, which helps ease any worry about it becoming an NPL debtor.
However, with Chartsiri acknowledging that digital-TV business had not gone as the bank had expected, there could be mergers and acquisitions in the industry, Capital Nomura added.
The securities company has a ‘buy’ recommendation on BBL stock, given the bank’s lending exposure among corporate and mid-sized SMEs – clients that are more active in using credit, bid bonds and letters of guarantee.
SCB Securities, meanwhile, has pointed to BBL forecasting 2016 Thai economic growth at 3-4 per cent, but seeing downside risk from the global economy, exchange-rate volatility and low commodity prices.
The bank has therefore set cautious 2016 financial targets, with its loan growth expected to stay at 3-5 per cent, versus 5 per cent last year, while fee income is expected to grow by 8 per cent against 11 per cent in 2015, the securities house said.
BBL expects to sustain its net interest margin at last year’s level.
The bank also points to a step-down in provisioning this year, but expects a small rise in its NPLs.
It claims to have already classified most troubled clients as NPLs with adequate provisions, SCB Securities said, adding that BBL’s loan-loss reserve coverage slipped to 185 per cent in 2015 from 204 per cent in 2014, although it remained the sector’s highest.
KGI Securities, meanwhile, has maintained its ‘neutral’ recommendation on BBL.
