The Nation



Bank of Ayudhya

2Q14 profit in line with model

Bank of Ayudhya Plc (BAY)

Earnings as expected

BAY posted a 2Q14 profit of Bt3.5bn, up by 14% YoY and 6% QoQ. The result was in line with our forecast but was 8% below the Bloomberg consensus. Pre-provisioning operating profit (PPOP) rose by 2% YoY and 5% QoQ to Bt8.6bn. 1H14 earnings represent 40% of our FY14 projection.

Results highlights

Lending increased by 0.7% QoQ and 0.3% YTD—better than our assumption of a 1% QoQ contraction. The retail loan portfolio rose 1.5% QoQ, led by 2.3% QoQ growth in home mortgages. However, corporate lending dipped by 2.2% QoQ and 3.2% YTD with the repayment of a working capital loan. In contrast, SME business rose 2% QoQ. The better 2Q14 lending boosted NIM to 4.24%, up by 8 bps QoQ and 2 bps YoY. Non-interest income (NII) fell 16% YoY, in tandem with the unfavorable business environment in 2Q14.

Fee revenue dipped 2% YoY (but was up 3% QoQ) to Bt3.9bn. OPEX was Bt8.5bn, down 3% YoY. BAY's cost/income ratio was 49.5% in 2Q14 down slightly from 50.2% in 1Q14 and somewhat lower than the 50.7% posted for 1Q14, due to a QoQ OPEX decline and a fatter NIM .

Loan loss provisions dived 28% YoY (but were up 4% QoQ) to Bt4.3bn—in line with our model. BAY's NPLs/gross loans ratio dipped to 2.9percent from 3.0% at end-March, while its loan loss coverage ratio declined negligibly to 134% at end-June from 135% three months earlier.


We expect 3Q14 earnings to rise slightly QoQ on lending growth and lighter LLPs, both QoQ and YoY.

What's changed?

Our profit forecasts stand unchanged at Bt17.2bn for FY14 and Bt22bn for FY15.


Despite the disappointing 1H14 earnings (due to a poor 1Q14 result), we maintain our HOLD rating on BAY, premised on: 1) BTMU's planned consolidation of the bank (future synergy-building), which will boost its loan portfolio by 25% early next year and 2) expectations of good earnings growth in 2H14, led by lighter LLPs and expanding corporate and SME business.

Comments conditions

Users are solely responsible for their comments.We reserve the right to remove any comment and revoke posting rights for any reason withou prior notice.