Bangkok Bank

Expect loan growth to drop back to normal levels of 8% next year amid a weaker global economy

But earnings growth will remain strong at 16% with flat NIM and 10% fee income growth, despite higher LLP

Maintain BUY and Bt181 TP pegged to 1.4x average FY11-12F P/BV

Loans to resume normal (slower) growth in FY12F. BBL is now guiding for 6-8% loan growth in FY12F against 14% in FY11F, on expectations of a weaker global economy. However, NIM will be stable at 2.7%, fee income growth at 10%, and LLP at Bt7.0bn. FY12F loan growth would be driven more by post-flood rebuilding, private investments and domestic consumption than exports. Expectations for a weaker global economy in 2012 would mean slower Thai export growth. And we do not expect higher domestic demand to be able to offset this, which is why we project BBL’s loan growth at 8%, in line with its internal target.

But strong earnings growth in FY12F. Despite weaker loan growth in FY12F, we expect BBL to post strong 16% earnings growth after imputing (i) flat NIM of 2.64%, (ii) higher LLP of Bt7.2bn, to concern over rising NPls, (iii) 8% fee income growth, and (iv) lower tax rate of 23%. In any case, BBL has a strong balance sheet with Bt40bn excess reserve to cover rising NPLs; it had the highest NPL coverage of 185% in 3Q11.

Maintain BUY. BBL is our top pick for its strong franchise and good relationship with corporate clients, which should support long-term growth. We value BBL at 1.4x average FY11-12F P/BV to derive Bt181 target price.