Bangkok Bank
Play
To survive unfavourable economy BUY
Bangkok Bank Plc (BBL)
- Higher NIM to boost 3Q15 profit growth against peers
We estimate 3Q15 net profit at B8.72bn or a growth of 8.6%qoq but a decrease of 8.9%yoy; loan and NIM of BBL are projected to grow against peers. Fee income would stay flat from the prior quarter; income from other operations would weaken qoq as dividend income would decrease after passing a dividend season; capital gain would lower despite an increase in gain from asset sales. On the other hand, operating expenses would decrease, mostly premise and equipment expenses and other expenses, which is another factor to help encourage BBL’s net profit in this quarter. Regarding asset quality, NPLs would increase due to the unfavorable economy, mostly from SMEs in many industries, yet it would still be in line with BBL’s NPL target of 2.7-2.8% of total loans. Accordingly, credit cost would increase to 70bp as BBL has increased its provisioning expense target in 2015 from B10bn to B12bn.
- Slightly cut forecast. Profit to weaken again in 4Q15
We revise down 2015-2016 earnings forecast respectively by 2.1% and 1.9% from earlier, mainly by increasing provisioning expense projection. As a result, BBL’s net profit is projected to shrink 6.1%yoy in 2015 but grow 9.2%yoy in 2016 under a more favorable economic situation when compared with 2015 after the government’s stimulus measures start to pay off. Still, earnings in 4Q15 would weaken from 3Q15 due to the increasing provisioning expense; NIM would remain unchanged, while fee income growth would help negate an accelerated growth of operating expense during a high season.
- Limited downside risk. Awaiting big investment cycle
We recommend BUY. 2015 fair value after the forecast revision is B185 (B194 earlier), using GGM method, based on PBV of 1.02x and long-tern ROE forecast of 11% (11.5% earlier). The current share price has undergone substantial correction until it is 2SD below five-year average PBV of 1.1x, thus reducing its downside risk. Dividend yield can be expected at almost 4% p.a.
