Bangkok Bank

Bangkok Bank Plc (BBL)

Investment thesis: We have revised down our BBL FY11-12 profit forecasts by 16% and 13%, respectively, to Bt25bn and 33.5bn. The reason is extra expenses and business interruption as a result of the 4Q11 flooding—aid to affected staff members, lower fee income and heavier loan loss provisions. However, we have raised our FY11 loan growth forecast to 13% from 11% to fine-tune for a very good lending performance, led by corporate loans. Given our pared back bottom-line expectations, we have cut our YE12 target price by 12.6% to Bt193, based on a conservative PBV of 1.3x.
QoQ 4Q11 loan growth, despite floods: We anticipate that the bank will report 4Q11 loan growth of 1.2% QoQ, driven by the corporate category (manufacturing, export-oriented industries and energy). Note that BBL’s 11M11 YTD lending expansion of 14% was much better than our FY11 forecast of 11%. We, thus, have raised our FY11 loan growth projection to 13%. Our FY12 lending expansion forecast remains 7% for the moment.
4Q11 NIM is static: Despite good lending growth, BBL guided that 4Q11 NIM would be around 2.9%, flat QoQ because of intensifying competition for business and deposit mobilization. We expect a NIM of 2.95% for the quarter. We conservatively assume an FY11 NIM of 2.8%, slightly better than the 2.6% reported for last year. At this stage, we model for an FY12 NIM of 2.84%.
Bigger loan loss provisions: The devastating flooding of October and November last year prompted BBL to increase its loan loss provisioning significantly above the normal level for the quarter, said management. The bank didn’t offer a figure, so we estimate 4Q11 provisioning of Bt3bn, up by 79% QoQ and 66% YoY.
Anticipate a poor 4Q11 profit: Given a stable NIM, lower fee-based income and higher OPEX (mostly staff expenses) and based on company guidance that loan loss provisioning increased substantially as a result of the flooding, we expect a dampened 4Q11 profit of Bt6.2bn, up 10% YoY but down 18% QoQ.