Bangkok Bank

Bangkok Bank Plc (BBL) 
  
Based on its guidance, we expect BBL to report below-consensus 3Q12 results.
Loan growth softened during the quarter, fee income continued to disappoint,
and NIM was under pressure. Going forward, the weakness in recent economic data
does not breed much optimism. Expecting a slowdown in loan and earnings growth,
we reiterate our Underperform call and target price, pegged to 1.4x FY12 P/BV,
derived from GGM assuming 13.5% long-term ROE, 11.7% COE and 6.7% growth.

What Happened
BBL met with analysts to provide business updates and its 3Q12 results preview.Its loan growth decelerated in 3Q12 but the full-year growth target is maintained at 6-8% (CIMB’s 9%) in anticipation of a seasonal pick-up towards year-end. The full-year growth targets for corporate (6-8%) and SME (7-9%) lending should be met, but those for retail (10-12%) and overseas (6-8%) lending will likely be beyond reach. It highlighted auto, petrochem, energy, agriculture and food as the more active industrial segments.The 3Q12 NIM looks set to contract by 5-10bp qoq as the bank activelysought deposits through special-rate campaigns. LDR dropped below 90%,from 92% at end-2Q12, as deposits expanded at a faster pace than loans.With more costly deposits being parked into low-yield assets, NIM was under pressure. Fee income stayed flat qoq. Its 10% full-year growth target is a tall order. A more realistic growth is 5-7%. In 2H12, provision should hover at THB1.6bn/quarter. The bank’s asset quality remained consistently good. The issuances of US$1.2bn in offshore bonds – US$400m for the 5.5-year @ 2.75% tranche and US$800m for the 10-year @ 3.875% tranche – are to fund offshore lending. This will allow a better match between lending and funding for its offshore books.

What We Think
We expect BBL to report a 3Q12 net profit of THB8,212m (-8% qoq, +9% yoy). Consensus is at THB8,634m. The bank will likely continue to trailed peers in retail lending while growth in
wholesale lending seemed to have already peaked.

What You Should Do
Sell BBL. Add to KTB for a large-bank position and TCAP for a second-liner.