Bangkok Bank

Bangkok Bank Plc (BBL) 

Although BBL sets cautious targets for 2015, it is positive L-T loan growth will recover over the next 3-5 years, driven by an investment cycle led by infrastructure projects. We maintain Buy, as it is in a good position to get in on the investment up-cycle with the strongest balance sheet and the highest market share in business loans. It also has the most extensive international network, positioning it to benefit from the regionalization trend, particularly AEC integration.  

 

Cautious 2015 targets. When setting its 2015 targets, BBL has factored in a gradual economic recovery led by public investment but remains cautious with regards to rising economic volatility both domestically and internationally. BBL targets: 1) 3-5% loan growth, 2) stable NIM at 2.3-2.4%, 3) stable L/D ratio at 86%, 4) 6-8% fee income growth (from higher loan-related fees and trade finance), 5) stable cost to income ratio at ~44% with 6-8% opex growth and 6) stable provisions at Bt8.5-9bn.   

 

L-T loan growth recovery. Based on the expectation of 3-4% GDP growth, BBL’s 2015 loan growth target of 3-5% breaks down into 2-4% for corporate loans, 5-7% for SME loans, 6-8% for retail loans and 6-8% for international loans. The bank expects investment, particularly public investment, rather than consumption to drive loan growth over the next 3-5 years on anticipation of an investment up-cycle triggered by progress on infrastructure projects. The bank expects demand for corporate loans to pick up in 2H15 though currently demand for working capital loans is dampened by falling commodity prices. We forecast a gradual recovery in loan growth to 4% in 2015F, 6% in 2016F and 8% in 2017F from 1.7% in 2014.   

 

Rising opportunity from regionalization, urbanization and digitalization. BBL is focusing on capturing opportunities arising from regionalization, urbanization and digitalization. It is in the best position to get in on the trend for regionalization as it has the most extensive international network (30 international branches) of all Thai banks. It is the only Thai bank awarded a banking license in Myanmar, and this branch will start operations this year. It also plans to open more branches in Laos. To capitalize on the trend towards urbanization, it will strengthen its network and operations in the provinces this year. It will also promote and invest intensively in digital banking this year.