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Bangkok Bank

Planted solidly to withstand headwinds BUY

Bangkok Bank Plc (BBL)

Small S-T headwind from political uncertainties. In line with economists, BBL

forecasts 2014F GDP growth of ~3% on the assumption that politics is back to normal

within 1H14. BBL expects 5-7% export growth, which will support 2014F GDP growth.

Talking to marine transportation operators, BBL is convinced that 2014F export growth

should not be lower than 5%. If the political turmoil lingers into 2H14, BBL puts worstcase

2014 GDP growth at 1-2%.

Most solid B/S ensures BBL can forge through without material impact. BBL

has the sector's strongest balance sheet in all respects with the strongest capital base

and a capital adequacy ratio of 16.9% (14.4% tier 1), the greatest liquid assets of

Bt839bn (1/3 of total assets), and the highest LLR coverage of 214% against NPLs and

257% against required LLR.

Maintains 2014 targets: Despite prolonged political uncertainties, BBL maintained its

loan growth target at 5-6%: 4-6percent for corporate loans, 6-8percent for SME loans, 8-10percent for

retail loans and +/-3percent for international loans. It expects to be able to sustain fee

income growth at 10% and NIM at 2.28%. Provisions are expected to be stable at Bt8-

8.5bn with credit cost of 45-50 bps. Cost to income ratio is expected to return to

normal at 41-43% without 2013's Bt2.6bn reversal of provisions for loss sharing with

the TAMC. We believe that any downside risk to BBL's 2014 targets is small.

Intact L-T opportunities: 1) AEC (ASEAN Economic Community) integration, 2)

provincial urbanization and 3) increasing cross-border trade and investment. Of all Thai

banks, BBL is most ready to grasp these opportunities, blessed with the highest excess

liquidity, the highest market share in business loans of ~30% and its long and most

extensive presence in CLMV countries.

Maintain as top Buy: 1) By all parameters (LLR coverage, capital funds and excess

liquidity) it has the strongest balance sheet, giving it the softest cushion to weather

the economic downturn brought by the political turmoil. Representing a flight to

quality, BBL shares have historically outperformed during economic downturns initially.

2) More proactive marketing, though still lagging peers, is expected to gradually

accelerate fee income growth. This began to be evident in 2013 when fee income

growth doubled to 11%, the highest for ten years. 3) We also like BBL as a laggard play:

its share price has been underperforming for several years because of its slower move

than peers and its sacrifice of ROE to gain the strongest B/S - which should pay off in

share price performance during downturns.


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