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%: 4-6% for corporate loans, 6-8% for SME loans, 8-10% for
retail loans and +/-3% 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.