Bangkok Bank

3Q14 profit to continue growing BUY

Bangkok Bank Plc (BBL)

- 3Q14 profit to grow from higher fee income, lower expense

We estimate BBL’s 3Q14 net profit at B9.20bn, growing 1.9%qoq and

2.8%yoy. Fee income is projected to rise, mainly from bancassurance and

brokerage businesses thanks to a recovery of the capital market. Operating

cost is estimated to decrease, lowering cost to income ratio from 45.21% in

2Q14 to 42.77% in 3Q14; expense on operation improvement and branch

expansion are expected to drop. However, net interest income is projected

to stay flat; corporate loans have been sluggish, while SME loans, housing

loans, and overseas loans could grow. NIM is projected to stay at 2.31% as

funding cost is not likely to grow as worried. In terms of asset quality, 3Q14

NPL is projected to increase, while the bank has kept its debt provision high.

Thus, end-3Q14 coverage ratio is projected to stay at 217.2%, the same

level as 2Q14.

- 4Q14: peak season

The economy is anticipated to rebound in 2H14, boosting corporate loans

and SME loans (high season) and reviving fee income which is currently far

below the target. We have a positive outlook on the business in 2015 owing

to government infrastructure mega projects. In addition, BBL is the only one

Thai commercial bank that won the license to operate in Myanmar. The

banks that win the licenses are allowed to lend only in foreign currencies,

though. This would expand BBL's operation further in Asia. Myanmar has

drawn interest from foreign corporations, particularly Thai corporations, to

invest in Myanmar at the beginning of the AEC liberalization.

- Share price undergoing correction. Accumulate

We derive FY2014 fair value (GGM, 1.31x PBV, 13.70% ROE) at B220. Its

share price is currently laggard, with PBV of only 1.2x.