Bangkok Bank

Bangkok Bank Plc (BBL)

- 2013 loan growth forecast raised on more optimistic capex cycle prospects.
- No rust on its ironclad balance sheet position in any aspect.
- Maintain Buy with a TP hike to Bt235.

Very optimistic on capex cycle. At the analyst meeting, BBL was very optimistic that
the capex cycle would continue through 2013-2015, underpinned by: 1) public
infrastructure projects, 2) rising cross-border investment driven by AEC and 3) more
business activity in the provinces. BBL sees upside risk to its 8% forecast of private
investment growth for 2013 of up to 12-15% vs. 13.7% for 2012F, mainly driven by
construction, building materials, real estate, auto, retail trade, hotel and hospital
sectors. BBL has more confidence in the actuality of infrastructure projects now that
there is a National Infrastructure Investment Act laying out the investment plan for
development of the Bt2trn infrastructure transportation system over 2013-2020, which
will secure budget and financing for the projects and remove uncertainty generated by
changes in government. The increased certainty of infrastructure projects is expected
to give upside risk to private investment related to public investment.
Raised loan growth forecast. We raised BBL’s loan growth forecast for 2013-2015 to
9% from 8% (vs. 9% for 2012) in response to the upside risk to BBL’s loan growth target
of 6-8% from a stronger capex cycle than earlier thought. This led to a 2-3% rise in
2013-2015 forecasts.
2013 targets. BBL’s 2013 targets have not changed much from 2012: 6-8% loan
growth (6-8% for corporate, 9-11% for SME, 10-12% for retail and 3-5% for
international), sustainable 2.5-2.6% net interest margin, 10% fee income (mainly driven
by trade finance on a recovery in exports and increasing focus on retail clients), stable
provisions at Bt6.5-7bn and stagnant 43-44% cost to income ratio. It will aim at more
SME and retail loans plus fee income, with promotional and marketing campaigns to
boost the latter.
Super strong balance sheet. BBL will continue its conservative stance with an
unwaveringly strong balance sheet and healthy liquidity (currently around one-third of
its total assets), prudent loan to deposit ratio of below 90%, the highest LLR coverage
(207% at YE2012) and a strong capital base with 11% tier-1 capital adequacy ratio.
Maintain buy with rise in TP. We raised BBL’s target price to Bt235 (1.5x 2013F
BVPS, based on 12.7% L-T ROE, 10.35% cost of equity and 5.5% L-T growth) from Bt220
to reflect the upward revision in loan growth. We maintain Buy on BBL for two
reasons: 1) It is best positioned to benefit from the country’s capex cycle and 2) it has
the strongest balance sheet both in terms of capital funds and LLR