Bangkok Bank

Bangkok Bank Plc (BBL)

Profit was 3.3% below our number
BBL reported 1Q13 earnings of Bt9bn, up by 8% YoY and 21% QoQ. The result was 3.3% below our number (due to bigger OPEX than modeled), but was 4.7% above the Bloomberg consensus. The bank’s 1Q13 pre-provision operating profit was Bt11.5bn, flat YoY but up 9% QoQ. 1Q13 earnings account for 23% of our FY13 projection.
Results highlights
1Q13 lending dipped 0.8% QoQ but was up 5.4% YoY to Bt1.59trn at end-March. The QoQ loan contraction was due to a big-ticket corporate loan repayment. Deposits at end-March were flat QoQ but up 11% YoY. 1Q13 NIM dipped 1 bps QoQ to 2.47%, as expected. Fee income rose by 12% YoY and 5% QoQ to Bt6.5bn (in line with our estimate). OPEX was Bt9.6bn, up 14% YoY (we had expected OPEX to rise only 12% YoY). Given a slimmer NIM and higher OPEX, the bank’s cost/income ratio rose to 45.4% in 1Q13 from 42.2% in the same period last year.
BBL set loan loss provisions of Bt1.74bn for the quarter, up 14% YoY (but down 31% QoQ). The NPLs/loans ratio was unchanged QoQ at 2.3% at end-March, while the loan loss coverage ratio declined slightly to 203.3% from 206.9% at YE12.
Outlook
We anticipate stronger QoQ lending growth in 2Q13 (assuming no big-ticket corporate debt repayments), led by the corporate and SME categories. Thus, core earnings should improve. We also expect the 2Q13 NIM to inch up in tandem with loan growth.
What’s changed?
Our FY13 and FY14 earnings projections stand unchanged at Bt40bn and Bt47bn, respectively.  
Recommendation
BBL is arguably the best-placed bank to benefit from the investment up-cycle in 2H13, as it has a hefty capital adequacy ratio of 16.7% (14.1% Tier-1) and the biggest single-client lending limit. Additionally, it stands out among Thai banks in its readiness for the advent of the Asean Economic Community (AEC) in 2015, as it has—by far—the most extensive regional branch network and offshore lending portfolio. There is scope for upside to our earnings forecast from greater fee income expansion, lower loan loss provisioning and better OPEX management than modeled. BBL currently trades at an inexpensive YE13 PBV of 1.4x against a regional mean of 2.0x. BUY!