Bangkok Bank

Bangkok Bank Plc (BBL)

What’s new? BBL posted July net lending of Bt1.41trn, down 0.5% MoM, due to big-ticket loan repayments among corporate and SME clients. Its deposits inched up 1% MoM, but its borrowing declined by 7.5% MoM. Thus, the end-July loans/deposits ratio was 91% down from 93% the previous month. 
Lending growth has scope for upside: Net loan growth in July was 5.1% YTD and 14.7% 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 interim, we anticipate that BBL’s August net lending will resume good MoM growth, driven by sustained demand among corporate and SME clients. Note that the bank normally posts its strongest lending expansion in the fourth-quarter.
3Q12 earnings will be good: Given sustained loan growth in 3Q12, a NIM of 2.7% (flat QoQ) and greater fee income, we forecast that earnings will rise by 21% YoY and 3% QoQ to Bt9.1bn for the third-quarter. Note that the Bloomberg consensus expectation is only Bt8.7bn. We also anticipate that the investment up-cycle and the acceleration of government stimulus spending will facilitate stronger lending and bottom-line performances in 2H12. 
Action: BBL is positioned to achieve hefty profit growth through this year and next, 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. Furthermore, 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 187% (the mean ratio is 115%) and a low NPLs/loans ratio of 2.7%.
Currently, BBL trades at an attractive YE12 PBV of 1.4x, which is below both the regional bank mean of 1.9x and the Thai Bank sector average of 1.5x. Because of its strong earnings profile and scope for lending growth upside next year, we maintain our BUY rating.