Banking

Banking

Good loan growth continues. Loan growth in the sector continued strong in February at
1.1% MoM, gaining momentum from 0.7% MoM in January. February loan growth was led by
retail (auto and housing) and SME loans, followed by corporate and government loans. KTB
has now had the strongest loan growth (in absolute amount) for two consecutive months;
we believe this is mainly attributable to government loans. Good 1.8% 2M13 YTD loan growth
lines up with our recent upward revision of the sector’s 2013F loan growth to 14% from 12%,
backed by increasing optimism that an investment cycle will be ignited by the government’s
Bt2trn infrastructure projects. Auto loans are expected to remain buoyant in 1H13 as autos
booked in 2H12 are delivered - mainly to first-car buyers who ordered in order to get the tax
incentive before it expired at the end of YE2012.
Stronger-than-usual SME loan growth. Historically lowest in the first quarter, growth in
SME loans was higher than expected, signaling the start of a capex cycle in the SME sector, led
by the construction segment. This confirms our expectation that 2013F loan growth will be
led by SME loans.
Upside risk to KTB’s loan growth from government loans. KTB has begun this year with
a very strong loan growth of 3.6% 2M13 loan growth (vs. our 14% for 2013F), in the main loans
to government entities. In February, KTB won bids for Bt27.7bn in government loans:
Bt16.2bn in two-year loans for mass transit projects (Blue and Green lines) and the rest being
one-month loans to finance the FIDF. We expect government loan growth to speed up as the
year progresses, with the Bt340bn flood protection loans needing to be drawn down by the
end-June deadline. The government is in the process of getting parliamentary approval for
the MoF to borrow Bt2trn to fund infrastructure projects for 2013-2020. This suggests upside
risk to KTB’s loan growth given its stronghold in government loans.
TISCO’s loan growth stronger than expected, but not much upside risk. TISCO’s 4.3%
2M13 loan growth vs. our 18% 2013F was stronger than expected. However, if there is any
upside to its loan growth it will be small, as we expect the slowdown in auto sales in 2H13 on
the lack of government stimulus, to bring a commensurate slowing in loan growth in 2H13.
Fund-raising gained momentum but still weak. MoM growth in deposits & borrowings
gained momentum in February but most banks (excepting SCB and KBANK) continued in low
gear in terms of fund-raising. Loan to deposit ratio (including borrowings) inched up to 90.7%
from 90% at January. Excess liquidity (net interbank and repos) eased 6% MoM to Bt659bn, still
reflecting ample liquidity in the system.
Top picks – BBL and KTB. KTB and BBL are kept as our top picks as investment cycle plays.
KTB and BBL are our top picks as investment cycle plays. KTB continues to be our lead sector
pick on: 1) easing credit cost after the 4Q12 sharp hike in LLR coverage, 2) easing asset quality
risk after SSI’s capital call and 3) its position as a government bank that puts it at the top of
the list for loans for public investment. BBL is our other choice, supported by: 1) the largest
excess liquidity and capital funds to capture loan growth opportunities trigged by the
investment cycle, 2) the largest exposure to corporate loans, which will benefit the most
from the investment cycle and 3) the highest LLR coverage.