Bangkok Bank

Bangkok Bank Plc (BBL) 

 

- 3Q15 profit grows from core business despite higher-than-expected provision  

BBL posted 3Q15 net profit at B9.05bn, growing 12.7%qoq but falling 5.4%yoy, which was 4% better than expected. Net interest income improved, loan growth and NIM (owing to lower funding cost) were better than expected, and fee income (especially loan transaction and mutual fund management fee income) and other income (especially profit from asset selling and Fx transaction) were far better than projection. Operating expense (especially premise and equipment expenses and other expenses) dropped as expected. In terms of asset quality, NPL increased by B2.98bn or 5.4%qoq to 2.8% of total loans (especially SME loans from many industries) as a result of the economic deceleration; this is still in line with BBL's target of 2.7-2.8%. As a result, credit cost increased to 108bp, much higher than expected but still in line with the bank's target; the company has increased its 2015 debt provision from B10.7bn in 9M15 to B12bn. 

- Profit to weaken in 4Q15 but grow in 2016 

We maintain our 2015-2016 earnings forecast, projecting BBL's net profit to fall 6.1%yoy in 2015 and then rebound by 9.2%yoy in 2016 since the economy would improve after the government's economic stimulus measures pay off. 4Q15 profit is expected to weaken from 3Q15 because debt provision expense would increase while NIM stays unchanged and growing fee income would be negated by a seasonal increase in operating expense. 

- Limited downside. Wait for big investment 

We recommend BUY. 2016 fair value (GGM, based on 1.03x PBV and 11% long-term ROE) is B198; PBV has dropped until it is 2SD below the five-year average PBV of 1.1x, significantly limiting a downside. Dividend yield can be expected at almost 4%p.a.