Bank of Ayudhya

Bank of Ayudhya Plc (BAY)

What’s new? BAY announced the acquisition of HSBC’s Thai retail banking operation, which comprises Bt17.5bn in assets. The acquired assets comprise retail loans of Bt3.6bn (credit cards, personal loans, mortgages) and short-term investments, mostly in the REPO market.    
Analysis: The deal will boost BAY’s total portfolio by 0.5% to Bt751bn and the retail lending proportion of its portfolio to 46% from 45% formerly. As such, the deal is small.
Management has set an FY12 lending growth target of 11% (the bank reported 11% growth for last year), which looks comfortably achievable. That number doesn’t include the possibility of further portfolio acquisitions, which would potentially mean upside to our current earnings forecast Bt13.4bn, up 43% YoY.
Action: We are very positive about BAY’s earnings profile for this year, driven by retail lending expansion, a fat NIM of 4.25% and reduced loan loss provisioning. Our BUY rating stands with a YE12 target price of Bt28.50.