Bangkok Bank

Bangkok Bank Plc (BBL)

What’s new? BBL posted net lending for January of Bt1.37trn, up by 1.5% MoM and 19% YoY, driven by the corporate portfolio. Its deposits and borrowing also rose by 1% MoM and 9% MoM, respectively. Thus, the end-Jan loans/deposits ratio was 94%, almost unchanged MoM. BBL announced, effective today, interest rate cuts of 0.125% for all lending rates—MLR, MOR and MRR from 7.25%, 7.50% and 8.00%, respectively, to 7.125%, 7.375 and 7.875%—and cuts to the saving rate and fixed three-month rate of 0.125% from 0.875% and 2.125-2.75%, respectively, to 0.75% and 2.0-2.625%.
Analysis: Reported net loan growth for Jan of 1.5% YTD and 19% YoY is far in excess of the trend necessary for BBL to achieve its FY12 target range of 6-8%. But we conservatively continue to assume loan portfolio growth of 7% for FY12—there’s a long way to go to the end of the year. We anticipate that BBL’s February lending will rise further MoM, driven by sustained loan demand among corporates. 
The bank’s interest rate cut announcement was in line with our model and street expectations following the BOT’s 25 bps cut to its one-day Repurchase Rate to 3.00% on Jan 25. BBL’s saving deposits comprise 46% of its total deposits. Note that we have revised up both our FY12 and FY13 NIM assumptions by 10 bps to factor in a lower deposit fee (to service FIDF debt) than we earlier assumed. We, thus, have revised up our FY12-13 earnings forecasts by 4.8% and 4.2%, respectively, to Bt33bn and 39.6bn.
Action: We expect BBL to deliver a good result for 1Q12, led by strong lending, sustained NIM, well-managed OPEX and lower loan loss provisioning. BBL stands out as the most resilient in the Bank sector to the threat of an economic downturn because it has the highest loan loss coverage ratio of 199% (the mean ratio is 102%) and a low NPLs/loans ratio of 2.7%. Our profit forecast upgrades have prompted us to raise our YE12 target price from Bt181 to Bt196, pegged to a justified PBV of 1.4x.
Currently, BBL trades at an undemanding YE12 PBV of 1.2x, which is below the regional bank mean of 1.7x and the Thai Bank sector average of 1.4x. Based on its strong earnings profile and scope for lending growth upside, we maintain our BUY rating.