Bangkok Bank
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Results for 1Q15 align with estimates BUY
Investment thesis
Profit for 1Q15 came in at expected level
BBL posted 1Q15 earnings of Bt9.4bn, up 5% YoY and 7% QoQ. The result was 2% below our forecast but 2% over the Bloomberg consensus, attributable to heavier-than-expected loan-loss provisions (LLPs). BBL’s LLP rose 42% YoY and 217% QoQ to Bt3bn (we had assumed LLPs of 2.5bn). The bank’s 1Q15 pre-provision operating profit was Bt13.5bn, up 5% YoY and 21% QoQ. Its earnings for 1Q15 represent 22.4% of our earlier FY15 earnings forecast.
Results highlights
Lending was down by 0.4% QoQ but up 1.6% YoY to Bt1.77trn at end-March 2015. Although SME, international lending and mortgage businesses rose, corporate loans declined on a big-ticket repayment. Deposits were Bt2.12trn, up a sharp 2.8% QoQ and 9.6% YoY. The bank’s NIM dipped 14 bps YoY and 19 bps QoQ to 2.1%, as deposit growth advanced faster than lending expansion. Likewise, its LDR declined to 84% at end-March from 85% at YE14. Fee income rose 19% QoQ and 14% YoY to Bt8.1bn, better than our assumption. OPEX was Bt10.4bn, up 10% YoY but down 14% QoQ. Its cost/income ratio crept up to 43.5% in 1Q15 from 42.3% in the same period last year.
The bank set LLPs of Bt3bn for 1Q15, soaring 42% YoY and 217% QoQ. Its NPL/loan ratio inched up QoQ to 2.2% from 2.1% at YE14, while the bank’s loan-loss coverage ratio dipped to 190% at end-March 2015 from 204% at YE14.
Outlook
We expect BBL to deliver YoY earnings growth further for 2Q15, led by lending expansion and lower LLP setting.
What’s changed?
We have maintained our FY15 and FY16 earnings forecasts.
Recommendation
We believe that BBL looks very resilient because around 61% of its total loan portfolio is corporate business, which will recover ahead of retail lending (Thai household debt remains high). Furthermore, corporate clients are statistically safer risks than SME customers, so the LLP needs for the former are lighter. It should be noted that about 17% of total loans are well diversified offshore (mostly in Cambodia, Lao, Myanmar, and Vietnam [CLMV subregion] markets). At 1Q15, BBL’s NPL/loan ratio was only 2.2% and it had the highest loan-loss coverage ratio in the sector, reaching 190%. The stock currently trades at a very cheap YE15 PBV of 1.0x against a regional mean of 1.5x and a Thai Banking sector average of 1.4x. Our BUY rating stands.
