Bangkok Bank

Bangkok Bank Plc (BBL)
 

What’s new? BBL posted May net lending of Bt1.42trn, up by 1.7% MoM and 17.5% YoY, driven by the corporate and SME categories. Its deposits and borrowing declined by 0.4% MoM and 13% MoM, respectively. Thus, the end-May loans/deposits ratio was 94% up from 92% the previous month. 
Lending growth has scope for upside: Net loan growth in May was 5.3% YTD and 17.5% YoY—far in excess of the trend necessary for BBL to achieve its FY12 target range of 6-8%. We conservatively assume loan portfolio growth of 12% for this year. In the meantime, we anticipate that BBL’s June lending will rise further MoM, driven by sustained loan demand among corporates and SMEs. Note that rgw bank plans to revise its loan growth target after it releases 2Q12 results.
2Q12 earnings will be good: Given sustained lending growth in 2Q12, a NIM of 2.7% (flat QoQ) and greater fee income, we forecast moderate earnings expansion of 12% YoY and 3% QoQ to Bt8.3bn for the second-quarter. Note that the consensus expectation is only Bt8bn. We also anticipate that the investment up-cycle and the acceleration of government stimulus spending will facilitate stronger lending and earnings performances in 2H12. 
Action: BBL should achieve strong profit growth through this year, driven by increased lending, a sustained NIM, greater fee income and well-managed OPEX. We forecast bottom-line expansion of 28% for FY12 to Bt35bn and 21% for FY13 to Bt42.5bn. Moreover, the bank would be resilient in the event of an economic downturn because it has the highest loan loss coverage ratio in the sector of 199% (the mean ratio is 102%) and a low NPLs/loans ratio of 2.7%.
Currently, BBL trades at an undemanding YE12 PBV of 1.3x, which is below both the regional bank mean of 1.7x and the Thai Bank sector average of 1.4x. Because of its strong earnings profile and scope for lending growth upside, we maintain our BUY rating.