Banking sector

Banking sector 

- Solid loan growth in January. Excluding BAY, KBANK outshines peers  

Ten commercial banks under our coverage (except KTB) reported the Summary Statement of Assets and Liabilities as of January 2015 with outstanding net loans (after allowance for doubtful accounts) of B7.63tr or the growth of 2.26%mom and 5.21%yoy, substantially high when compared with our FY2015 net loan growth target of 6.35%yoy. BAY showed the biggest net loan growth among peers at 23.9%mom and 37.3%yoy because it was the first quarter that the bank consolidated its financial statement with Bank of Tokyo-Mitsubishi UFJ (BTMU). Considering only separate financial statements, however, the sector’s net loans in January still decreased, which was a normal situation in the beginning of the year. Excluding BAY, KBANK was a big bank that showed the largest net loan growth in the month, driven mainly by SME loans (factoring) while corporate loans showed only slight growth and repayment rate of retail loans was usual. The other banks posted lower net loans, led by BBL, TCAP, TISCO, and KKP. The banks that focus on car leasing loans were adversely affected by higher repayment rate than loan launching rate, plus the banks’ more stringent loan approval policy.  

- Corporate and SME loans to boost 2015 growth   

We estimate net profit growth in FY2015-2016 at 9.6%yoy and 12.9%yoy, respectively. We still have a positive outlook toward the banking business in 2015 from acceleration of budget disbursement for the government projects and stimulus measures that will subsequently benefit private investments in related projects, both corporate and SME loans for infrastructure projects; although the projects may be delayed, it is already in our projection under FY2015 net loan growth forecast of 6.35%yoy. A challenge in 2015 is the amendment to the Civil and Commercial Code B.E. 2557 (No. 20) regarding new regulations on guarantee law and mortgage law, taking effect after 90 days from the date of proclamation on the Royal Gazette (February 11, 2015). According to most banks, they believe the law amendment will have a limited and insignificant effect on the business. 

- Top picks: KBANK, KTB, TMB    

We maintain NEUTRAL for the sector. Top picks are KBANK (highest ROE among peers with potential for notable fee income growth), KTB and TMB (their ROE tends to increase in over the next two years).