Bangkok Bank

Bangkok Bank Plc (BBL)

1H14 was not favorable for the main business because of seasonal
effect, but a recovery is foreseen in 2H14 from proceeding mega
infrastructure investments, which would benefit BBL share price
that is still laggard.

- Profit to contract, main business to remain weak in 2Q14
We estimate BBL’s 2Q14 net profit at B8.24bn, contracting 8.0%qoq and
19.6%yoy. Income from core business would weaken, especially noninterest
income e.g. Fx gain and capital gain. Fee income would stay flat
from the prior quarter as a result of decreasing loan transaction. Overall,
1H14 fee income shrank 4.3% from the same period last year (yoy) and
was lower than the bank’s full year target of 10%yoy. Operating expense
would increase following branch expansion, so cost to income ratio would
rise to 44.15%. Net interest income would show good growth against
sluggish expansion of total loans because NIM in 2Q14 would improve
slightly to 2.19% from decreasing funding cost following the policy rate and
lower deposit base.
- Maintain forecast. Growth season in 2H14
We believed the projected economic rebound in 2H14 would help boost net
loan growth and earnings of BBL. Also, there has been a positive sign from
the bank. Accordingly, we maintain our earnings forecast for FY2014
although 1H14 net profit would account for only 43% of FY2014 forecast.
Speaking of earnings in 2H14, corporate and SME loans would grow because
of a high season, thus helping increase the current lower-than-expected fee
income. However, the bank forewarned that NIM in the second half of the
year might become higher because funding cost would gradually increase as
a result of a competition in the deposit market amidst the picking up
economy.
- Share price laggard peers and market
We recommend buying BBL. 2014 fair value is B220 (1.31x PBV, GGM, longterm
ROE forecast of 13.70%). The current share price has a low PBV of
1.2x and still is laggard the sector and the market.