BBL announced 1Q14 earnings of Bt9bn, up 17% QoQ but down 1% YoY. The result was in line with our forecast and the Bloomberg consensus. The bank’s 1Q14 pre-provision operating profit was Bt12.8bn, up by 11% YoY and 11% QoQ. 1Q14 earnings represent 22% of our FY14 projection.
Lending was flat QoQ (but up 9.6% YoY) at Bt1.75trn at end-March 2014. Although the SME and retail portfolios saw growth, corporate lending declined on loan repayments. Deposits were flat QoQ but grew 5% YoY. BBL’s NIM declined by 14 bps YoY and 1 bp QoQ to 2.32%, due to slower lending and the BOT’s policy interest rate cut during the quarter. 1Q14 fee income rose by 9% YoY and 5% QoQ to Bt7.1bn, in line with our estimate. OPEX was Bt9.4bn, down by 2% YoY and 11% QoQ. Given good fee income growth in the face of lower OPEX, the cost/income ratio slipped to 44.5% in 1Q14 from 51.1% the previous quarter and 45.4% in 1Q13.
BBL set loan loss provisions of Bt2.1bn for 1Q14, up by 21% YoY and 21% QoQ. The NPLs/loans ratio remained 2.2% at end-March 2014, unchanged from YE13, while the loan loss coverage ratio dipped to 210% from 214% three months earlier.
We anticipate that BBL’s 2Q14 earnings will decline in YoY terms, due to lower extra gains on investments and because in 2Q13 it booked an extra gain on sales bad debts to TAMC.
We maintain our FY14 and FY15 earnings projections unchanged.
BBL looks to be the most resilient in the Bank sector to domestic economic weakness. Note that 16% of total lending is offshore, mostly in Asian markets. Furthermore, 61% of its portfolio is corporate loans (statistically, big companies are better risks than SME or retail customers). Thus, its asset quality should remain strong, despite the unfavorable business environment. At end-March BBL had a low NPLs/loans ratio of 2.2% and the largest loan loss coverage ratio in the sector of 210%. The stock trades at a cheap YE14 PBV of 1.1x against a regional mean of 1.5x and a Thai Bank average of 1.4x. Our BUY rating stands.