Bangkok Bank

Bangkok Bank Plc (BBL)
- 3Q13 profit to contract qoq due to lower loans and fee income
BBL's 3Q13 net profit is projected at B8.51bn, contracting by 16.9%qoq and 9.2%yoy
due to the following factors: 1) 3Q13 fee income is projected to fall by 6.3%, but
rising 12.6% yoy (higher than expected at 10%), mainly due to decrease in income
from bancassurance (both life and non-life insurance businesses) and income from
subsidiary involving capital market, as capital market has not been as strong as
2Q13. Meanwhile, fee income from loans and fund selling has grown continuously. 2)
3Q13 operating expense is projected to rise by 23.9%qoq and 9.7%yoy, as reversal
of estimated loss on the impaired assets transferred to TAMC at B2.58bn is not
recognized in 3Q13 like it was in 2Q13. As a result, 3Q13 cost to income ratio would
rise from 33.75% to 44.51%. 3) 3Q13 other normalized income is projected to fall by
26.9%qoq, but rise 30%yoy, mainly due to decrease in profit from sales of
investment (mainly bond portfolio), profit from NPAs, and dividend that has been
lower than 2Q13. 4) 3Q13 net interest income is projected to stay flat: rising by
0.6%qoq and 0.2%yoy, in line with net loans growth projected at 1.5%qoq and
9.1%yoy from corporate loans and SME loans. Housing loans have grown well, but
still quite low compared to overall loans. 9M13 net loans growth is projected to rise to
5.4% from 2012, in line with BBL's 2013 target at 6-8% yoy (our target at 8%).
3Q13 NIM is likely to drop slightly by 3bp to 2.24% due to rising funding cost. 3Q13
debt provision has been back to normal, falling by 37.8%qoq (but rising 36.4%yoy)
as in 2Q12 BBL made extraordinary income from TAMC additional provision to
increase coverage ratio. 3Q13 credit cost is projected to fall from 81bp to 50bp, in
line with NPL (gross) that has stayed unchanged qoq at 2.39%. As pressure has
outweighed benefit, 3Q13 would be pressed.creased only slightly as projected. Credit
cost increased to 81bp from 44bp in 1Q13.
- 2014 loans target close to 2013, boosted by government projects
We maintain our FY2014-2014 forecast. 9M13 earnings is likely to make up only 70%
of total FY2013 earnings forecast, but 4Q13 earnings result is likely to grow due to
increasing fee income and net loans in high season, boosting yield and NIM. BBL
projects that 2014 loans, NIM and fee income growths would stay close to 2013, as
the bank see that the growth would be stable. Though B2tr loan bill is currently
interpreted by the Constitutional Court, BBL has confidence that the projects would
make a progress under government usual budget. Government investment would
take place from 2H14 on, expected to boost 2013-2014 EPS growth to 23.8%yoy and
13.9%yoy
- Reiterate "BUY". Price already undergoes correction, low PBV and PER
We reiterate "BUY". Current share price has over 16% upside at the fair value of
B230 (GGM, 1.48x PBV). BBL share price has undergone correction, while PER and
PBV are still low, contrast to potential growth that grants BBL advantage. This is a
good chance to accumulate.