BANK Sector

BANK Sector
August loan reverts to 1%mom growth. BAY shows highest growth
Ten commercial banks under our coverage reported a summary statement of
assets and liabilities (C.B 1.1) as of August 2013 with a combined net loan (after
allowance for doubtful debt) of B8.62tr, increasing only 1.05%mom and 12%yoy.
Most commercial banks showed monthly growth except TCAP (-0.5%mom and
+12.6%yoy). The bank had high repayment of corporate loans and short-term
working capital loans for SMEs. New car leasing loan has grown at a slower rate,
while used car leasing loan issuance has been decelerated, resulting in the minus
monthly net loan growth. On the other hand, the bank that showed the largest net
loan growth this month was BAY, thanking mainly to notable growth of corporate
loan after deceleration in early 2013 and impressive growth of SME and housing
loans. Only car leasing loan showed sluggish growth as suppressed by used car
leasing loans. Other big banks like BBL, KBANK, and SCB also exhibited larger net
loans in August from all types of loans (except car leasing loans for SCB). Medium
and small banks like TISCO and KKP showed considerably decreasing net loan
growth this month when compared with the monthly average in 1H13 and 2012
because of weakening car leasing loans. Overall, the net loan growth of the
banking sector in 8M13 increased to 6.7% from end-2012 (YTD), still in line with
FY2013 target at 9.8%yoy, thus helping to alleviate concerns because loan growth
usually accelerates in 2H, despite a threat of domestic economic deceleration.
Combined deposits (including loans for small banks) in August 2013 were B9.46tr,
rising 0.9%mom and 11%yoy, better than the previous month due to fiercer
competition in deposit gathering of commercial banks to keep their market share.
The Government Savings Bank (GSB) has also heightened its deposit gathering.
LHBANK, TMB, KTB, and BAY showed the largest growth in deposit this month,
while KKP and TISCO were with the largest decline.
- Higher pressure on 2H13 and 2014 profit outlook
We have a more negative outlook toward the business and earnings of the
banking sector in 2013-2014, especially for loan and fee income because it
depends on local economy, which tends to decelerate in the export, private
investment, and private consumption. If the government’s mega investment
projects are terminated, it will affect Thailand’s economy until 2014. Recovering
export volume might not be able to offset other contracting economic figures.
Moreover, with rising concerns over asset quality, the banks will have to keep high
debt provision. Previously, 2H13 net profit had been projected to improve from
1H13 due to decreasing debt provision and the growth of core business on a high
season of loan and fee income. However, after the recent forecast cut to reflect
the economic slowdown in 2H13, there is a good chance that the loan growth
might not be aggressive, while debt provision would remain high. 2H13 net profit
would make 49% of FY2013 net profit forecast.
- UNDERWEIGHT. BBL and KBANK still favorable in long term
We assign UNDERWEIGHT. The sector’s EPS growth in 2014 is estimated at
9.6%yoy, lower than the market EPS growth of 13%yoy. Top picks are BBL and
KBANK, which are blue chip banking stocks with healthy financial status and
capital base, and long-term profitability, but investors should buy when the prices
weaken to avoid risks as the prices have risen rapidly.