Bangkok Bank

Bangkok Bank Plc (BBL)

Up forecast to reflect surprising NIM in 1H12. New FV is B222
2Q12’s profit growth beats expectation…loan thrives
continuously, NIM robust as expected
BBL posted 2Q12’s net profit at B8.87bn, growing 9.8%qoq and
19.8%yoy, beating expectation and making a new quarterly high.
Operating cost has risen as large as 15.5%qoq and 11.9%yoy, mainly
from a hike of employee expense from annual salary raise and salary
base increase in 4Q11. Moreover, fee income growth was not seen in
this quarter and still substantially lower than FY2012’s target at
10%yoy, while debt provision has increased slightly from a slight
increase of NPL. However, all these negative factors have been entirely
offset by the growth of the core business as follows. 1) Net interest
income in 2Q12 has shifted 5.4%qoq and 6.5%yoy – higher than
expected, in line with the net loan growth of 2.1%qoq and 13.1%yoy in
this quarter. Consequently, overall, net loan in 1H12 has grown 4.8%
from end-2011, still in line with our forecast for net loan growth of
10%yoy. The growth has resulted from every type of loan including
corporate and SME instead of clustering only in corporate loans like it did
in 1Q12. 2) NIM has increased 7bp to 2.53% - as expected. Yield from
loan issuance has improved continuously, thanks to new loans and lower
impacts from loan relent for flood-suffering debtors, contrary to a slight
decline in funding cost, making NIM rise. Overall, net profit in 1H12 was
B16.9bn, growing 22.2%yoy and accounting for 55% of our FY2012’s
net profit forecast.

Up 2012-2013’s forecast to reflect surprising NIM in 1H12
We revise up our net profit forecast for 2012-2013 by 9.6% and 11.9%
from previously in order to reflect surprising NIM in 1H12. After the
forecast revision, net profit forecast in 2012-2013 has grown 23.3%yoy
and 17.7%yoy. For 2H12, bright business outlook is foreseen from
demands for corporate and SME loans which aim to expand investment
internationally, especially in Asia in order to prepare for the AEC
liberalization. Moreover, with a shortage of labors in Thailand,
entrepreneurs have begun to be interested in overseas business
expansion, which will lead to the growth of interest income and fee
income in 2H12.

New fair value is B222. Gradually buy on price weakness
We reiterate BUY. 2012’s fair value after the forecast revision, at 1.59x
PBV, is B222 from B220.5, still implying 17% upside. In addition, BBL’s
share price since the beginning of the year until now has exhibited the
4th highest rise among peers by 26%, outperforming the sector’s
average and the market, so it might correct base in the short term after
2Q12’s earnings report. Consequently, we recommend investors to
invest on the price weakness in order to reduce risk from a short-term
price correction.