Banking sector

Banking sector  

 

- Short-term measures to help grassroots, accelerate govt projects 

The government’s third economic team, led by Deputy Prime Minister Somkid Jatusripitak and Finance Minister Apisak Tantivorawong, has launched the following stimulus measures: 1) providing the grassroots, which are farmers, people with low income, and SME entrepreneurs, a better access to financing sources by injecting money to state banks, which are the following specialized financial institutions: Government Savings Bank (retailers and the low income), Bank for Agriculture and Agricultural Cooperatives (farmers affected by the drought problem), and Government Housing Bank (housing loans for the low income), as well as drawing KTB in to provide soft loans (this measure will be launched within the next one month); 2) accelerating the government investments, reducing project sizes together with starting the mega projects so that the auctions can immediately begin. 

- Money injection starts in 4Q15, reviving confidence 

We are positive about the government’s stimulus packages. The short-term measure of providing soft loans aims directly at helping farmers and the grassroots, which would revive household spending. Although a benefit for private banks in providing soft loans will not be significant because their target customers are still the same group, in the long run it will help boost retail loans (credit card, housing loans, and personal loans) if purchasing power improves. Meanwhile, the government investment will progress more quickly after the project size reduction, which would benefit private banks, especially big banks providing loans for companies that receive jobs from the government. KTB is most outstanding among peers. 

- Accumulate KBANK, TCAP. Speculate KTB 

We recommend NEUTRAL for the sector; a downside of SETBank is likely limited after the 26% correction since end-2014 until its PBV is only 1.2x, which is -2SD lower than the five-year average of 1.7x and below the regional average of 1.27x. We like KBANK(FV@B232) for its good loan and revenue diversification and TCAP([email protected]) for its stronger asset quality and capital base and better net profit growth than the sector’s average in 2015-2016. We also recommend speculating KTB(FV@B20), since it will benefit from the aforementioned stimulus measures and its 3Q15 profit would outshine peers.