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Bangkok Bank

Opportunity awaited in 2H14 BUY

Bangkok Bank Plc (BBL)

1H14 was not favorable for the main business because of seasonal

effect, but a recovery is foreseen in 2H14 from proceeding mega

infrastructure investments, which would benefit BBL share price

that is still laggard.


- Profit to contract, main business to remain weak in 2Q14

We estimate BBL's 2Q14 net profit at B8.24bn, contracting 8.0%qoq and

19.6%yoy. Income from core business would weaken, especially noninterest

income e.g. Fx gain and capital gain. Fee income would stay flat

from the prior quarter as a result of decreasing loan transaction. Overall,

1H14 fee income shrank 4.3percent from the same period last year (yoy) and

was lower than the bank's full year target of 10%yoy. Operating expense

would increase following branch expansion, so cost to income ratio would

rise to 44.15%. Net interest income would show good growth against

sluggish expansion of total loans because NIM in 2Q14 would improve

slightly to 2.19percent from decreasing funding cost following the policy rate and

lower deposit base.

- Maintain forecast. Growth season in 2H14

We believed the projected economic rebound in 2H14 would help boost net

loan growth and earnings of BBL. Also, there has been a positive sign from

the bank. Accordingly, we maintain our earnings forecast for FY2014

although 1H14 net profit would account for only 43% of FY2014 forecast.

Speaking of earnings in 2H14, corporate and SME loans would grow because

of a high season, thus helping increase the current lower-than-expected fee

income. However, the bank forewarned that NIM in the second half of the

year might become higher because funding cost would gradually increase as

a result of a competition in the deposit market amidst the picking up

economy.

- Share price laggard peers and market

We recommend buying BBL. 2014 fair value is B220 (1.31x PBV, GGM, longterm

ROE forecast of 13.70%). The current share price has a low PBV of

1.2x and still is laggard the sector and the market.


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