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November B/S: Robust loan growth

Banking

Robust loan growth resumes. The sector's MoM loan growth rose to 1.5% in November from 0.3% in October, mainly from corporate loans with a mix of SME and retail loans (chiefly mortgage loans). Auto loan growth was very slow and even negative for some banks. The sector's 11M13 YTD loan growth was 9.1%, in line with our 2013F of 10%. We see small upside risk to our 2013F loan growth from the seasonally strong loan growth in December. KTB's 12.5% 11M13 YTD loan growth already beat our 2013F of 12%. We expect a slowdown in loan growth in 2014 to 7percent from ~10% in 2013F with some downside risk from the political unrest. Most banks plan to go after SME loans in 2014, particularly small SMEs. Retail loan growth is expected to slow, particularly auto loans, without the first-car buyer incentive program.

Corporate loan growth is expected to be put off as a result of the political unrest.

Top picks - KBANK and KTB. We maintain KBANK and KTB as out top picks. KBANK has the strongest non-interest income to cushion against downside risk to loan growth plus the most small SME loans, which seems to be the segment with the strongest growth potential. KTB remains a top pick on: 1) the lowest valuation in terms of PBV/ROE of large banks;

2) rising market share of loans and fee income as a result of a more proactive strategy and better service after reorganization by the new CEO; 3) benefit from higher public investment even without the Bt2bn infrastructure bill.






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