Banking Sector
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Positive sign from loans in 8M14 Neutral
Banking Sector
Loan growth seen in August
Ten commercial banks under our coverage reported the Summary
Statement of Assets and Liabilities as of August 2014 with outstanding net
loan (after allowance for doubtful accounts) of B9.06tr or the growth of
0.41%mom and 5.01%yoy. Overall, 8M14 net loan increased only 1.56%
from end-2013, in line with FY2014 net loan growth forecast of 5.92%yoy.
Retail loans, especially car leasing, declined from the prior month,
consistent with overall car sales in 7M14 that contracted 59.9%yoy. Home
loans and personal loans still showed good growth. Corporate loans were a
major driving factor; although the banks have focused mainly on factoring
loans, there was a positive sign from higher new loan issuance than the
repayment. SME loans stayed quite flat; new loan issuance was close to the
repayment. The banks with strongest net loan growth in August were BBL
(corporate), BAY (corporate and SME), and LHBANK (all segments). For
KKP, TISCO, and TCAP which focus on leasing business, total net loan of the
three banks decreased in the month. Outstanding deposit in August
(including borrowings for small banks) was B9.89tr, increasing 0.28%mom
and 4.56%yoy, led by LHBANK, SCB (back to focus more on long-term
deposit raising), and BAY(from a special eight-month fixed deposit). Overall,
8M14 deposit improved only 0.60% from end-2013.
- Loan remains in uptrend in rest 2014
We have a positive outlook toward the loan business in the rest of the year,
projecting the loan growth to meet the target because of a high season.
SME and retail loans are believed to grow at a faster pace, while corporate
loans would be mostly long-term loans for investment. A positive sign is
foreseen until 2015, when an eight-year plan of the mega infrastructure
investment project with the budget of B2.40tr is commenced, boosting
demands for loans, especially corporate and SME.
- Top picks are KBANK, KTB, TMB
We assign NEUTRAL for the sector. Top picks are KBANK (the highest ROE
among peers, with a chance of a further rise after K-transformation project
is compete), KTB, and TMB (ROE of the two banks could increase in the
next two years).
