Bangkok Bank

Bangkok Bank Plc (BBL)
 

What’s new? BBL posted net lending for November of Bt1.3trn, up by 1.5% MoM and 14.1% YTD. The bank posted surprisingly good growth, given that flooding disrupted business in Bangkok and across much of central Thailand during the month. Lending expansion was driven by the corporate portfolio (mostly working capital for manufacturing and agriculture). On the other hand, its deposits and borrowing dipped by 0.3% MoM and 3.2% MoM, respectively. Thus, the end-November loans/deposits ratio rose to 90% from 89% at end-October.
Analysis: Cumulative 11M11 net loan growth of 14.1% YTD has already surpassed BBL’s FY11 target range of 6-8% by a substantial margin. We, however, conservatively assume aggregate portfolio growth of 11% for FY11 and 7% for FY12. We anticipate that BBL’s December lending will post a MoM decline because of delayed fallout from the flooding.
The bank’s NPLs will rise slightly to Bt45.8bn at YE11 from Bt45.6bn at YE10, due mainly to fallout from the flooding. Nevertheless, it will maintain its loan loss provisioning at Bt7-8bn for FY11.
Action: We expect BBL to deliver a good result for 4Q11, supported by a sustained NIM, well-managed OPEX and gains on investments from holding BLS shares. Besides, we view that the bank is likely to be the most resilient player in the sector because it has the highest loan loss coverage ratio of 185% (the mean ratio 99%) with a low NPLs/loans ratio of 2.8%. Thus, we do not expect it to set bigger loan loss provisions, as we don’t anticipate a significant rise in NPLs (caused by flooding in 4Q11). Furthermore, BBL’s strong 11M11 lending performance implies scope for upside to its earnings this year and next year.
The stock trades at an undemanding YE12 PBV of 1.1x (its long-term average of 1.2x). In comparison, the Thai Bank sector mean is 1.2x and the regional peer average is 1.6x. We reiterate our BUY rating.