Thanachart Capital
August net lending up 1.2% MoM BUY (maintained) Target Price: Bt45.00 Price (18/09/12): Bt36.75
Thanachart Capital Plc (TCAP)
What’s new? TCAP’s net lending amounted to Bt671bn in August, up by 1.2% MoM, 10.0% YTD and 10.5% YoY. Its 8M12 net loan growth was somewhat above the trend necessary for it to achieve our FY12 projection of 11% expansion. We expect TCAP to sustain lending momentum through September and beyond, as major automobile makers have ramped up production to meet strong demand for new cars, boosted by the government’s first-time car buyer tax rebate scheme.
The end-August loans-to-deposits (plus borrowing) ratio stood at 94% at end-August, up slightly from 93% a month earlier, due to the effect of a 16% MoM drop in outstanding B/Es. Note that at end-August B/Es accounted for 14% of the total funding mix, down from 38% at YE11.
FY12 loan growth forecast has scope for upside: Our 11% lending expansion projection for FY12 looks conservative, given TCAP’s annualized 8M12 lending growth rate of 15%. GDP growth, boosted by government stimulus spending, will provide further opportunities for TBANK to build its retail and small SME lending portfolios (and fee income related to loans).
Retail-driven play: We anticipate that TCAP will deliver strong lending growth for 3Q12, led by HP and housing loans. The scale of lending growth could make for a fatter QoQ NIM in 3Q12. We expect a third-quarter NIM of 3.0%, up from 2.9% in 2Q12.
Potential upside from asset sales: Management has been studying the possibility of divesting Thanachart Life Assurance to a third party. The deal (if done) could generate an extra gain of Bt5-6bn for TCAP’s bottom-line this year (or early next year). We haven’t factored this possible upside into our model.
Action: Regardless of the potential gain from asset divestment, TCAP’s strong lending and earnings growth profile should support its share price. The stock currently trades at a PBV of just 1.1x—the cheapest of the banks we cover and much below the sector mean of 1.7x. We rate TCAP a BUY as a laggard play with a YE13 target price of Bt45, pegged to a conservative PBV of 1.2x.
