Bangkok Bank

Bangkok Bank Plc

 

4Q15 profit was 35% above our forecast

BBL posted 4Q15 earnings of Bt7.7bn, down 12% YoY and 15% QoQ. The result was 35% (but 3% below the Bloomberg consensus), attributable to greater NIM and larger extra gains than were expected. BBL had 4Q15 NIM of 2.29% against our number of 2.1% and the bank also received extra gains on investment of Bt1.1bn (we had assumed its advance to reach a mere Bt300m). Its 4Q15 pre-provision operating profit was Bt13.1bn, soaring 18% YoY but dropping 9% QoQ. FY15 earnings dipped 6% YoY to Bt34.1bn, representing 106% of our FY15 earnings forecast.

Results highlights

Lending was up 3.3% QoQ and 4.9% YoY to Bt1.87trn at YE15. Because SME, corporate lending and mortgage business rose well QoQ, BBL’s NIM inched up 18 bps QoQ to 2.29%. Likewise, its loan-to-deposit ratio (LDR) was 89.4% at YE15 from 87.5% three months earlier. Fee income jumped 21% YoY and was flat QoQ to Bt8.2bn, moderately exceeding our assumption. NII grew 5% YoY and 8% QoQ in line with loan growth. OPEX was Bt12.1bn, up 1% YoY and 11% QoQ. BBL’s cost/income ratio declined to 47.9% at 4Q15 down from 51.9% in the same period last year as fee income growth outpaced OPEX growth and net-interest-income expansion.

The bank set loan-loss provisioning (LLP) of Bt3.9bn for 4Q15, soaring 313% YoY but down 20% QoQ. BBL’s NPLs/loans ratio was flat QoQ to 2.8% at YE15, while its loan-loss-coverage ratio inched up to 185.3% at YE15 from 172.5% in 3Q15. Note that NPL dipped 3.2% QoQ to Bt56.2bn in 4Q15 from faster troubled debt restructuring. 

Outlook

We forecast that BBL will deliver YoY earnings growth for 1Q16, boosted by continuing loan growth, well managed NIM and well managed funding costs.

What’s changed? 

We have maintained our FY16 earnings forecasts.

Recommendation 

We believe that BBL is in a better position to cope with economic uncertainty than its peers because about 61% of its total loan portfolio is corporate business, which will recover ahead of retail lending (Thai household debt remains at the high level of 80%). Note that about 16% of its total loans is well diversified among offshore borrowers (mostly in CLMV markets). At 4Q15, BBL’s NPL/loan ratio was only 2.8% and it had the highest loan-loss-coverage ratio in the sector, amounting to 185.3%. Its asset quality is well controlled now as the bank was able to pare down its NPLs during 4Q15. Given the better economic outlook this year, upcoming government stimulus packages and the stock’s cheap valuation with PBV of 0.8x, we reiterate our BUY rating for BBL.