Bangkok Bank

Bangkok Bank Plc (BBL)

3Q12F preview. We expect 3Q12F profits to rise 11% YoY but fall 6% QoQ to Bt8.35bn.
Guidance suggests that 3Q12 underperformed, as shown in the following items:
1) Loan growth: Slowed QoQ to ~1% from 2.1% in 2Q12 due to seasonally high
corporate loan repayments.
2) NIM: To slip 5-10 bps QoQ due to a narrowing in loan to deposit ratio to 88-
89% from 92% at 2Q12 upon aggressive fund-raising.
3) NII: A QoQ decrease in non-interest income brought by a QoQ fall in forex and
investment, with stagnant fee income QoQ.
4) Cost to income ratio: QoQ easing to 42-43% from 46.5% in 2Q12.
5) Asset quality: Stable QoQ with provisions and NPLs stable QoQ
6) Taxes: QoQ seasonal rise in effective tax rate to 24-25%.

Cut 2012F fee income. BBL cut its 2012 fee income growth target to 5-7% from 10%
in reaction to lower fees from bancassurance and mutual funds than expected. We
have therefore lowered our 2012F fee income growth to 6% from 8%. BBL admits that
the failure to meet goal arose out of its poor selling capability. Weak fee income
expansion is a chief factor behind BBL’s underperforming ROE.

Confirms seasonal acceleration in loan growth in 4Q12. Despite concerns about
an export slowdown, BBL is confident that its loan growth will repeat its historical
pattern of seasonal strong acceleration in 4Q12, driven by demand for working capital
loans, particularly from the agricultural sector. However, we bring down our 2012F loan
growth expectations to 11% from 12% due to the guidance to potentially lower 3Q12
loan growth than anticipated. Management disclosed that 9M12 growth for corporate
and SME loans has beaten the full-year target (6-8% for corporate loans and 7-9% for
SME loans) but that, 9M12 growth for retail loans is slightly behind (10-12%).

Maintain buy. Following our 3Q12 preview meeting, we maintain Buy on BBL with an
unchanged target price of Bt210 (1.45x average 2012F & 2013F BVPS, based on 13.6%
L-T ROE, 10.6% cost of equity and 4% L-T growth). Two factors back it as a Buy: 1) It
stands ready to benefit the most from the country’s capex cycle and 2) it has the
strongest balance sheet both in terms of capital funds and LLR coverage.