Bangkok Bank

Bangkok Bank Plc (BBL)
3Q12 profit projected to shrink QoQ… NIM drops due to deposit raising. Tax leaps
BBL’s 3Q12 net profit is projected to stand at B7.81bn or a shrinkage of 12%
QoQ but still growth of 3.4% YoY. The company would fail to make a new
quarterly high in 3Q12 like other major banks we’ve already presented earlier
(KBANK, SCB, and KTB) due to the following reasons. 1) NIM in 3Q12 is
projected to decline by 7bp to 2.46%, resulting in a drop of net interest
income by 1.1% QoQ and 0.5% YoY due to aggressive acceleration on
deposit raising in 3Q12 in order to enhance liquidity in preparation for the
global economic situation that’s still in fluctuation and the future’s loan
launch. This reflects from the loan to deposit ratio (LDR) that has descended
to 88.2% at end-3Q12 after increasing to 92.1% at end-1H12, while the
company’s yield is still quite stable in this quarter. The net loan in 3Q12 is
projected to grow only by 1.5% QoQ since there is some debt repayment
from corporate loans while there’s a thrive in SME and retail. For the overall
look of net loan in 9M12, it is projected to grow by 6.3% from end-2011
which is still in line with our FY2012 target forecast at 10% YoY (normally,
BBL’s loan will grow very outstandingly in the 4th quarter of every year since
it’s the high season of SME loan). 2) The income tax rate is projected to
return to normal at 24.5% in this quarter after declining to 15.8% in 2Q12
(normally, BBL’ income tax provision will be assigned at a high level in the
1st and 3rd quarters and repayment will be made in the 2nd and 4th quarters
which is often lower than assigned). 3) Fee income in 3Q12 is projected to
stabilize QoQ which is in line with the loan transaction that has decelerated
considerably. The retail loan that has bared more growth won’t be much
beneficial for the growth of fee income since it’s only 11% of the total loan.
In terms of debt provision, it is projected to trail along policy at B1.6-
1.7bn/quarter which is in line with the total NPL that still has stabilized close
to one in 2Q12 or lower than 3% of the total loan.

Maintain forecast… NIM might put pressure constantly in 4Q12
We maintain our 2012-13 net profit forecast. Nevertheless, although 9M12
operating result is projected at B24.7bn which is still in line with FY2012 net
profit forecast (considered 74%), we’re getting more concerned due to 4Q12
operating result that tends to face pressure from NIM that might stabilize or
weaken as a result of the aggressively constant deposit raising plan to
maintain LDR at 85-90%. Moreover, the retail loan that still has grown below
FY2012 target will also be another factor to depress NIM in 4Q12 and might
push 4Q12 operating result to weaken more than projection, probably
resulting in FY2012 net profit growth below target.

Aim to invest when price weakens. Share price projected to underperform continually
We reiterate our recommendation of “BUY” for BBL, but aiming to invest
when the price weakens. Although the current share price has 15% upside
from 2012 fair value (using PBV at 19.5x) at B222, the pressure from 2H12
operating result (that might not be as outstanding as peers) is likely to
continue clouding over the share price for the next 3 months to underperform
the sector.