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Banking Sector

Growth foreseen in 2H14

Banking Sector

Although overall earnings in 1H14 are not impressive, growth is

foreseen in 2H14 and 2015 instead. Accordingly, we are likely to

revise up our forecasts. Top picks during the reviving economy are

SCB, KBANK, and KKP.


- Profit to stabilize in 2Q14 despite slowing economy

We estimate 2Q14 net profit of ten commercial banks under our coverage at

B50.3bn, stabilizing both qoq and yoy. Overall, the banking business has

remained good in 2Q14, against the slowing economy and decelerating

loans. NIM has been strong because of gradually decreasing funding cost. At

the same time, fee income has stabilized despite a low season and long

holidays. A pressuring factor in the quarter, on the other hand, is rising

NPL; this is not worrying since it will occur only from some debtors, not

from the economic downturn as a whole, but it might cause the debt

provision to increase. TMB and KTB would show the largest net profit growth

whereas BBL would post the greatest plunge in net profit this quarter.

- Growth awaited in 2H14

We have not projected to see business growth in 1H14 but 2H14 and 2015

instead. The economy in 2H14 would get stronger from the NCPO's

economic stimulus roadmap. Consequently, we maintain our 2014 GDP

growth forecast of 2%, which would help increase the confidence toward

earnings growth of the banking sector in 2014 and might lead to earnings

forecast up revision soon because our previous assumption was too

conservative.

- Top picks are SCB, KBANK, KKP

We assign NEUTRAL for the sector and select SCB, KBANK, and KKP as top

picks during the reviving economy as they focus mainly on giving SME and

retail loans.


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