Bangkok Bank

Q4 2012's profit to grow 12.5%qoq

Bangkok Bank Plc (BBL)

4Q12's profit to grow qoq…Loan and NIM decrease, tax expense shrinks

We estimate BBL's net profit in 4Q12 at B8.77bn, reversing to the growth of

12.5%qoq and 48.5%yoy again after contracting in the prior quarter due to

following contributions. 1) Net fee income is projected to shift 5.4%qoq and

19%yoy, in line with corporate and SME loan transactions which have grown

aggressively in this quarter. However, overall net fee income in FY2012 has

thrived only 5.4%yoy, still lower than the bank's and our target at 10%yoy. 2)

Corporate income tax expense is anticipated to decrease to only B200m in this

quarter or a tax rate of only 2.2percent from 25.6% in 3Q12. Although it is a normal

situation for BBL to set high tax provision in 1Q and 3Q for the tax expense in 2Q

and 4Q, which is usually lower than the provision, in 2013 there will be a

reduction of the tax rate to 20percent so the bank has to accelerate on booking some

tax deducible expenses such as specific provision for exercising privilege from

the tax rate at 23%, like that occurred to most banks in 4Q11. On the other

hand, there will be pressuring factors as follows. 1) NIM is projected to contract

continuously by 14bp qoq to 2.32%, so net interest income would stay flat both

qoq and yoy as a result of a rise in funding cost (+11bp) in this quarter from

aggressive deposit raising in the past and in this quarter by 3%qoq to prepare

for future loan issuance. At the same time, yield has shrank severely more than

14bp from a cut in all loan rates by 0.125% in October 2012 despite the growth

of 3.7%qoq in net loan due to a high season of corporate and SME loans.

Consequently, total net loan in FY2012 has grown 9.3%yoy, in line with the

target we have estimated. 2) Debt provision in 4Q12 is anticipated at B2bn,

increasing from the policy level of B1.6-1.7bn/quarter from NPL that rose

insignificantly compared with total loan. Overall, the aforementioned positive

factors have more weight and could offset the effect from the pressuring factors,

so net profit in FY2012 is projected to increase to B33.5bn, growing 22.7%yoy,

only 0.5% lower than our current forecast.

Aggressive growth foreseen in 2013 with more strong points

For the business outlook in 2013, the bank aims for more aggressive growth. In

spite of still keeping the net loan growth target of 6-8%yoy, the bank has shown

an intention to make it above the target with the strong point of corporate and

SME loans which have shown larger growth in 2013 under supports from CAPEX

cycle and investment to prepare for the AEC. Moreover, the bank will strengthen

weak points by improving its image to show the strong points, especially its

position as a leader in SME loan and housing loan. This is believed to benefit net

profit in 2013, making it grow continuously by 17.7%yoy and hit a year high.




Time to accumulate. Good chance of laggard stocks of big banks sector

We recommend buying BBL. It is a time to accumulate the stock again. The

current share price has 26% upside from 2013's fair value at 1.59x (GGM) of

B245. Moreover, it is still laggard other big banks, against the business growth

that would become robust again in 2013.