Bangkok Bank

Bangkok Bank Plc (BBL)

- 1Q14 earnings result better than expected
BBL's 1Q14 net profit was reported at B8.96bn, growing 16.6%qoq and staying
unchanged yoy (5.7% above our expectation), thanks to better-than-expected Fx gain.
Operating expense returned to normal after the high season has passed; cost to income
ratio dropped to 41.39%. 1Q14 normalized profit grew by 19.5%qoq. Net interest
income rose by 1.4%qoq (as expected). Though net loan stayed unchanged, demand for
working capital loan and housing loan increased, and loan for overseas businesses have
been growing nicely. NIM dropped by 2bp to 2.17% (lower than expected) as a result of
the the policy interest rate cut. Fee income grew by 1.7%qoq (better than expected),
mainly from bancassurance and credit card. Income from other operations increased
(better than expected) thanks to Fx gain and profit from investment and non-performing
asset (NPA) selling. In terms of asset quality, BBL's NPL increased by B1.21bn; raising
NPL to total loan ratio slightly to 2.23%. As a result, BBL raised its debt provision by
21.1%qoq (as expected) with credit cost of 48bp, in line with the bank's B8-8.50bn/year
debt provision policy.
- To stay strong in 2Q14
We maintain our FY2014-2015 earnings forecast. FY2014-2015 EPS growth is expected
at 12.0%yoy in 2014 and 9.1%yoy in 2015 under the assumption that the sector's net
loan growth is 5%p.a and NIM is 2.22% in 2014 and 2.26% in 2015. For the worstcase
scenario that BBL's net loan growth is 3%yoy as a result of the political turmoil,
BBL's net profit is not likely to decline much. Every 1% of net loan growth below our
forecast is expected to decrease FY2014 net profit by only 0.41% of our forecast. We
project 2Q14 earnings result to stay unchanged mom. Though net loan growth is not
likely to be strong qoq, NIM would improve because interest expense is likely to drop
due to the recent interest rate cut.
- Sector's top pick
BBL is the sector's top pick. Its share price with 1.1x PBV has 4% upside from the
FY2014 fair value (GGM, 1.18x PBV, 13.3% long-term ROE) of B197. Dividend yield is
projected at 4-5%p.a, while the total return is expected as high as 8-9% p.a. We
reiterate to buy.