Bangkok Bank

Bangkok Bank Plc (BBL)
 

Q1 2012 profit in line with estimate: BBL posted 1Q12 earnings of Bt8.1bn, up by 25% YoY and 37% QoQ. The result was in line with our estimate, but 3% above the consensus. Pre-provisioning operating profit (PPOP) rose by 7% YoY and 21% QoQ to Bt11.4bn. Q1 2012 earnings represent 23% of our FY12 forecast.
Results highlights: Lending expanded by 3% QoQ and 16% YoY to Bt1.51trn at end-March, driven by the corporate and SME portfolios. Net interest income (NII) was Bt13.2bn, up 11% YoY but down 5% QoQ. Q1 2012 fee income was flat YoY, but up 9% QoQ to Bt5.8bn. OPEX was Bt8.5bn, up 5% YoY but down 20% QoQ (note that BBL launched a Bt2bn bailout package for employees and clients affected by the Q4 2011 flooding). Thus, the cost/income ratio declined to 42.7% in Q1 2012 from 53.0% the previous quarter.
Net interest margin (NIM) slipped by 2 bps QoQ and 13 bps YoY to 2.68% (we had expected a NIM of 2.66%). BBL set normalized loan loss provisions of Bt1.5bn for the quarter, down by 13% YoY and 78% QoQ (we expected LLPs of Bt1.8). BBL’s NPLs/loans ratio was 2.6% at end-March, down from 2.7% at the end of last year, while its loan loss coverage ratio dipped to 193% from 199% at YE11.
Outlook: We anticipate strong Q2 2012 lending, led by the corporate and SME categories. NIM should be sustained at about the Q1 2012 level.
What’s changed? Our FY12 and FY13 earnings forecasts are Bt35bn and Bt42.5bn, respectively.  
Recommendation: BBL’s prospects are solid—its loan portfolio will sustain growth, fueled by a private sector investment up-cycle, economic recovery and continued international business expansion. Moreover, among the banks we cover, BBL has the lowest loans/deposits ratio and the highest loan loss coverage ratio of 193%. We maintain our BUY rating with a YE12 target price of Bt225, pegged to a justified PBV at 1.6x, which would still be below its 2003 peak of 1.8x and the regional mean of 1.9x.