Bangkok Bank
Bangkok Bank Outperform (17E TP Bt185.00)
Company Update
Close Bt174.50
Banking
Earnings upgrade/Earnings downgrade/Overview unchanged
February 1, 2017
Improving outlook for 2017 Price Performance (%)
2017 financial targets BBL provided the bank’s key financial targets for 2017, which highlight a more comfortable operating environment for 2017E vs. 2016; see Figure 1. This is especially in regard to an improving loan growth outlook, stable or slight NIM improvement and a more stable NPL situation vs. 2016. The bank still expects the NPL situation to be manageable given its solid balance sheet as well as the easing concern over the digital TV case. However, the fee income growth target of 5% will be the biggest challenge, in our view, given the potential impact from the PromptPay program this year. The impact will depend on the migration rate, with gradual migration expected in the early stage.
Source: SET Smart
FY16
FY17
Consensus EPS (Bt)
18.466
20.145
KT ZMICO vs. consensus Share data
‐1.8%
0.9%
Reuters / Bloomberg
BBL.BK/BBL TB
Paid‐up Shares (m)
1,908.84
Par (Bt)
10.00
Market cap (Bt bn / US$ m)
333.00/9,463.00
Foreign limit / actual (%)
25.00/29.48
52 week High / Low (Bt)
182.00/146.00
Avg. daily T/O (shares 000)
4,932.00
NVDR (%)
33.11
Estimated free float (%)
97.24
Beta
1.12
URL
www.bbl.co.th
CGR
Anti‐corruption
Level 4 (Certified)
Prapharas Nonthapiboon Analyst, no 17836 [email protected] 66 (0) 2695‐5872
Switch to Outperform on appealing valuation and solid balance sheet We switch our rating for BBL to Outperform from Underperform following our slight earnings upgrade. We see BBL being well positioned and prepared to handle the headwinds and challenges given its healthier balance sheet cushion vs. peers. Moreover, its attractive valuation (with 2017E P/BV of just 0.85x vs. the sector average of ~1.1x) remains its main price appeal.
2017’s main strategies and opportunities Regarding the 2017 outlook, BBL highlighted that it sees gradual improvement in domestic loan demand backed by the government’s stimulus measures. It continues to expand its housing loan base given its low base. Moreover, BBL continues to see opportunities and advantages in three main areas, including regionalization, urbanization and digitalization over the long term. It is also in preparations for gearing toward a digital banking platform over the long term. Raise 2017‐18E earnings estimates by 1‐3% We fine‐tuned our earnings estimates with the bank’s latest guidance and results (especially in regard to the better‐than‐expected NIM). We raised our net profit (NP) estimate for 2017E by 1% and 2018E by 3%. The main revision is higher NIM given that BBL will still benefit from deposit re‐pricing in 2017E vs. other banks due to its longer deposit duration compared to peers. At the same time, we also lowered our net fee income growth forecast to factor in the potential impact of the PromptPay program that started on 27 Jan‐17. Note also that the bank’s cost‐to‐income ratio is likely to decline in 2017 vs. 2016 when it booked an extra provision for contingencies (>Bt3bn) in the other expense item for the Thai TV and CTH‐GMM‐Fox cases. Following our NP revision, we raised our 17E target price to Bt185/share from Bt180/share for implied target P/BV of 0.9x. Financials and Valuation FY Ended 31 Dec PPOP (Btmn) Net Profit (Btmn) EPS (Bt) EPS Growth (%) Book value (Bt) Dividend (Bt) FY Ended 31 Dec PER (X) PBV (X) Div. Yield (%) ROE (%)
2015 35,680 34,181 17.91 ‐6% 189.56 6.50 2015 9.75 0.92 3.72 10%
2016 37,888 31,815 16.67 ‐7% 198.56 6.50 2016 10.47 0.88 3.72 9%
2017E 41,958 34,619 18.14 9% 204.55 6.50 2017E 9.62 0.85 3.72 9%
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 1 of 5
2018E 44,892 38,814 20.33 12% 218.97 6.71 2018E 8.58 0.80 3.85 10%
2019E 48,323 44,295 23.21 14% 236.07 6.96 2019E 7.52 0.74 3.99 10%
Figure 1: BBL’s financial targets for 2017 vs. our forecasts Financial targets Loan growth (%) Net fee income growth Net interest margin (NIM)
2015 Actual 4.9% 10.8%
2016E Bank's targets 3‐5% 8% (+/‐)
2016 Actual 3.9% 1.8%
2017E Bank's targets 4‐6% 5.0%
2017E KTZ's forecasts 5.0% 2.0%
2.16%
2.2% (+/‐)
2.32%
Maintain
2.34%
Cost to Income
43.8%
~45%
47.7%
45% (+/‐)
45.9%
NPL/loans
2.80%
3.2‐3.3%
3.22%
Maintain
3.25%
Provision (Btbn)
14.7
~15bn
15.7
Near 2016 level
16.9
Provision (bps of loans)
0.78
Not disclosed
0.81
Not disclosed
0.83
Source: KT ZMICO Research Note: 2017 bank’s targets were announced on 31 Jan‐17 and based on a 17 GDP growth forecast of 3‐4%.
Figure 2: Key changes in our earnings revision 2017E
Key assumption changes Net profit (Btmn) % Change in net profit from previous foreca % Change in net profit YoY Provision for loan loss (Btmn) Provision for loan loss (% to loans) Net fee income growth (%) Net interest margin (NIM) Cost to income ratio
New 34,619 1% 9% 16,916 0.83% 2% 2.34% 45.9%
2018E Previous 34,384
New 38,814 3% 12% 17,010 0.78% 5% 2.36% 45.1%
16,641 0.80% 8% 2.25% 45.7%
Previous 37,831
17,805 0.80% 9% 2.30% 44.8%
Source: KT ZMICO Research
Figure 3: BBL's P/BV band and sensitivity of market prices based on P/BV at different standard deviation levels (X)
2017E
1.8 +2 S.D.
1.6
+2.0SD
1.61
330
89
+1.5SD
1.50
308
76
+0.5 S.D.
+1.0SD
1.39
285
63
-0.5 S.D.
+0.5SD
1.28
263
50
-1 S.D.
Average
1.17
240
38
-1.5 S.D.
-0.5SD
1.06
217
25
-2 S.D.
-1.0SD
0.95
195
12
-1.5SD
0.84
172
-1
-2.0SD
0.73
150
-14
-2.5SD
0.62
127
-27
Avg.
Jan-17
Jan-16
Jan-15
Jan-14
Jan-13
Jan-12
Jan-11
Jan-10
Jan-09
Jan-08
Jan-07
Jan-06
Source: Bloomberg, KT ZMICO Research
Figure 4: BBL's PER band and sensitivity of market prices based on PER at different standard deviation levels (X)
2017E
14.0
PER (x) Implied market
+2 S.D.
13.0
+1.5 S.D.
12.0 11.0
Upside/ Downside
price (Bt)
to current price (%)
+1 S.D.
+2.0SD
13.0
236
35
+0.5 S.D.
+1.5SD
12.4
225
29
Avg.
10.0
-0.5 S.D.
+1.0SD
11.7
213
22
9.0
-1 S.D. -1.5 S.D.
+0.5SD
11.1
201
15
Average
10.4
189
8
-2 S.D.
8.0
153
-12
7.8
141
-19
-2.5SD
7.1
128
-26
Source: Bloomberg, KT ZMICO Research
Jan-17
8.4
-2.0SD
Jan-16
-1.5SD
Jan-15
5.0
Jan-14
-6
Jan-13
165
Jan-12
9.1
Jan-11
-1.0SD
Jan-10
1
6.0
Jan-09
177
Jan-08
9.7
Jan-07
-0.5SD
Jan-06
7.0
Jan-05
-2.5S.D.
Jan-05
0.6
to current price (%)
+1 S.D.
1.2
0.8
Upside/ Downside
price (Bt)
+1.5 S.D.
1.4
1.0
PBV (x) Implied market
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 2 of 5
Statement of Comprehensive Income (Btmn) Year‐end 31 Dec Total Interest Income
2015 2016 2017E 2018E 2019E 103,814 102,443 106,407 114,979 130,091
Total Interest Expenses
46,304
38,445
37,398
40,844
49,948
Net Interest Income
57,510
63,998
69,009
74,135
80,143
Net Fee and Service income
24,071
24,492
24,982
26,231
28,067
Gain on trading and FX transactions
7,774
7,459
7,496
7,871
8,422
Other Income Total Non‐Interest Income
13,374
9,908
9,857
11,231
11,601
45,218
41,860
42,335
45,333
48,090
Operating Income
102,728
105,858
111,345
119,468
128,233
Personnel Expenses
24,227
25,247
26,762
28,100
29,786
Premises and Equipment Expenses
9,458
9,909
10,602
11,239
11,913
Other Expenses Total Operating Expenses
11,360
15,349
13,712
14,533
15,803
45,045
50,505
51,077
53,871
57,502
Operating Profit
44,310
45,444
50,411
54,366
59,130 ‐
Extraordinary Items
‐
‐
‐
‐
Provision for Loan Losses
14,654
15,728
16,916
17,010
15,309
Taxation
8,630
7,556
8,454
9,474
10,807
Minority Interests Net Profit
(220) (254) (279) (299) (320) 34,181
31,815
34,619
38,814
44,295
EPS (Bt) Pre Provisioning Operating Profit (PPOP) Pre Provisioning Profit (PPP)
17.91 35,680 48,834
16.67 37,888 47,543
18.14 41,958 51,535
20.33 44,892 55,823
23.21 48,323 59,604
2015
2016
Cash
61,432
66,338
67,665
69,018
70,399
Interbank & Money Market
372,007
394,612
414,343
435,060
456,813
Statement of Financial Position (Btmn) Year‐end 31 Dec
2017E
2018E
2019E
Assets
REPO
‐
‐
‐
‐
‐
Net Investment in Securities
520,805
547,941
575,299
632,720
695,882 2,355,195
Loans
1,868,903
1,941,093
2,038,106
2,180,741
Accrued Interest Receivables
4,279
4,653
4,891
5,234
5,652
Loans & Accrued Int.Rec.
1,873,182
1,945,746
2,042,998
2,185,975
2,360,847
Less: Loan Loss Reserves
(104,187) (119,518) (132,044) (142,768) (149,695)
Net Loans and Receivables
1,768,995
1,826,227
1,910,954
2,043,207
2,211,153
Properties Foreclosed
13,579
12,262
11,036
9,933
8,939
Premises and Equipment, Net
46,108
45,231
46,587
47,985
48,945
Other Assets
52,926
51,617
53,685
56,468
58,693
Total Assets
2,835,852
2,944,230
3,079,568
3,294,392
3,550,823
2,090,965
2,178,141
2,302,730
2,480,041
2,693,324
Liabilities & Equity Total Deposits Interbank & Money Market
128,681
130,928
124,382
128,113
131,956
Total Borrowings
138,403
137,815
137,126
136,441
135,758
Other Liabilities
115,772
118,101
124,622
131,531
138,854
Total Liabilities
2,473,821
2,564,985
2,688,860
2,876,126
3,099,893
Paid‐up Capital (Bt10 Par)
19,088
19,088
19,088
19,088
19,088
Premium on Share Capital
56,346
56,346
56,346
56,346
56,346
Retained Earnings
120,974
135,842
140,177
160,583
186,070
Other reserves
86,500
91,500
96,500
101,500
106,500
Other Equity Items
78,924
76,239
78,344
80,471
82,620
Total Shareholders' Equity Source: KTZMICO Research
361,832
379,016
390,456
417,989
450,625
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 3 of 5
Valuation and Ratio Analysis Year‐end 31 Dec
2015
2016
2017E
2018E
2019E
17.91
16.67
18.14
20.33
23.21
Per share Data (Bt) EPS DPS
6.50
6.50
6.50
6.71
6.96
189.56
198.56
204.55
218.97
236.07
Multiplier (X) PER
9.75
10.47
9.62
8.58
7.52
P/BV
0.92
0.88
0.85
0.80
0.74
Dividend yield (%)
3.72
3.72
3.72
3.85
3.99
Net Profit
‐5.9%
‐6.9%
8.8%
12.1%
14.1% 14.1%
BVPS
Growth (%) EPS
‐5.9%
‐6.9%
8.8%
12.1%
Net Interest Income
‐2.5%
11.3%
7.8%
7.4%
8.1%
Non Interest Income
27.8%
‐7.4%
1.1%
7.1%
6.1%
Net Fee & Service Income Operating Income
10.8%
1.8%
2.0%
5.0%
7.0%
8.8%
3.0%
5.2%
7.3%
7.3%
Operating Expenses
4.5%
12.1%
1.1%
5.5%
6.7%
Pre Provisioning Operating Profit (PPOP) Pre Provisioning Profit (PPP) Loans Deposits
3.1% 34.4% 4.9% 1.6%
6.2% ‐2.6% 3.9% 4.2%
10.7% 8.4% 5.0% 5.7%
7.0% 8.3% 7.0% 7.7%
7.6% 6.8% 8.0% 8.6%
Gross NPLs
24.8%
22.4%
8.1%
0.1%
‐6.3%
56,226
68,841
74,388
74,473
69,797
2.8%
3.2%
3.3%
3.0%
2.7%
Loan Loss Reserve/NPLs
185.3%
173.6%
177.5%
191.7%
214.5%
Accrued Interest/Loans
0.2%
0.2%
0.2%
0.2%
0.2%
Loan Loss Reserve/Loans
5.6%
6.2%
6.5%
6.5%
6.4%
Property Foreclosed/Loans
0.7%
0.6%
0.5%
0.5%
0.4%
Equity/Asset
12.8%
12.9%
12.7%
12.7%
12.7%
Tier I to Risk Assets
15.8%
16.4%
16.7%
16.7%
16.7%
Capital Adequacy Ratio (CAR)
17.9%
18.3%
18.5%
18.4%
18.3%
Loan to Deposit Ratio (LDR)
89.4%
89.1%
88.5%
87.9%
87.4%
Loan to Deposit and Borrowings
83.8%
83.8%
83.5%
83.3%
83.2%
Financial ratios Gross NPLs (Btmn) Gross NPL/Loans
Capital & Liquidity Ratio
Profitability Ratio ROA
1.2%
1.1%
1.1%
1.2%
1.3%
ROE
10.0%
8.6%
9.0%
9.6%
10.2%
Cost to Income
43.8%
47.7%
45.9%
45.1%
44.8%
Non Interest Income/Total Income
44.0%
39.5%
38.0%
37.9%
37.5%
Net Interest Margin (NIM)
2.16%
2.32%
2.34%
2.36%
2.37%
2015
2016
2017E
2018E
2019E
Key Assumptions Loan Growth ‐ Net Net Fee Income Growth
4.9%
3.9%
5.0%
7.0%
8.0%
10.8%
1.8%
2.0%
5.0%
7.0%
Cost to Income
43.8%
47.7%
45.9%
45.1%
44.8%
Net Interest Margin
2.16%
2.32%
2.34%
2.36%
2.37%
Provision expenses (Btmn) Provision (% of loans) Source: KTZMICO Research
14,654 15,728 16,916 17,010 15,309 0.78% 0.81% 0.83% 0.78% 0.65%
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 4 of 5
Note: KT ZMICO has two major shareholders, Krungthai Bank PLC (KTB) and Seamico Securities PLC (ZMICO). Therefore, prior to making investments in the securities of KTB and ZMICO, investors should consider the risk factors carefully. An executive of KT ZMICO Securities is also a board member of BCP, BTC, CI, CPI, KBS, MAJOR, MK, PACE, PSL, SVH, VNG, ZMICO, SAWAD, TFG. A management member of KT ZMICO Securities is also a board member of BTC and NFC. KT ZMICO is a financial advisor for U, LOXLEY, ZMICO, MAKRO, CPALL, SAFARI, M‐CHAI, CRANE, TFD. KT ZMICO is a co underwriter of RPH.
Corporate Governance Report (CGR) Source: Sec, Thai Institute of Directors Association (IOD) Excellent (scores: 90 ‐ 100) Very Good (scores: 80 – 89) Good (scores: 70 – 79)
Satisfactory (scores: 60 – 69) Pass (scores: 50 – 59) No Logo N/A (scores: below 50)
Anti‐corruption Progress Indicator Source: Sec, Thailand's Private Sector Collective Action Coalition Against Corruption programme (Thai CAC)
Level 1 (Committed) : Organization’s statement or board's resolution to work against corruption and to be in compliance with all relevant laws. Level 2 (Declared) : Public declaration statement to participate in Thailand's private sector Collective Action Coalition Against Corruption (CAC) or equivalent initiatives Level 3 (Established) : Public out preventive measures, risk assessment, communication and training for all employees, including consistent monitoring and review processes Level 4 (Certified) : Audit engagement by audit committee or auditors approved by the office of SEC, and receiving certification or assurance by independent external assurance providers (CAC etc.) Level 5 (Extended) : Extension of the anti‐corruption policy to business partners in the supply chain, and disclosure of any current investigations, prosecutions or closed cases Insufficient or not clearly defined policy Data not available / no policy
DISCLAIMER This document is produced using open sources believed to be reliable. However, their accuracy and completeness cannot be guaranteed. The statements and opinions herein were formed after due and careful consideration for use as information for the purposes of investment. The opinions contained herein are subject to change without notice. This document is not, and should not be construed as, an offer or the solicitation of an offer to buy or sell any securities. The use of any information contained in this document shall be at the sole discretion and risk of the user.
KT ZMICO RESEARCH – RECOMMENDATION DEFINITIONS STOCK RECOMMENDATIONS
SECTOR RECOMMENDATIONS
BUY: Expecting positive total returns of 15% or more OVERWEIGHT: The industry, as defined by the analyst's over the next 12 months coverage universe, is expected to outperform the relevant OUTPERFORM: Expecting total returns between ‐10% primary market index by at least 10% over the next 12 months. to +15%; returns expected to exceed market returns NEUTRAL: The industry, as defined by the analyst's coverage over a six‐month period due to specific catalysts universe, is expected to perform in line with the relevant UNDERPERFORM: Expecting total returns between primary market index over the next 12 months. ‐10% to +15%; returns expected to be below market UNDERWEIGHT: The industry, as defined by the analyst's returns over a six‐month period due to specific coverage universe, is expected to underperform the relevant catalysts primary market index by 10% over the next 12 months. SELL: Expecting negative total returns of 10% or more over the next 12 months
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 5 of 5
KT ZMICO Securities Company Limited Head Office
WWW.KTZMICO.COM
8th, 15th‐17th,19th, 21st Floor, Liberty Square Bldg., 287 Silom Road, Bangrak, Bangkok, Thailand 10500 Telephone: (66‐2) 695‐5000 Fax: (66‐2) 695‐5173 KT ZMICO Connect 662 695 5555
Central World Branch
Amarin Branch
22nd Floor, Amarin Building, 496‐502 Ploenchit Road, Lumpini, Pathumwan, Bangkok 10330 Telephone: (66‐2) 018‐6200 Fax: (66‐2) 018‐6298, (66‐2) 018‐6299
8th Floor, Ton Son Tower, 900 Ploenchit Road, Lumpini, Pathumwan, Bangkok 10330 Telephone: (66‐2) 626‐6000 Fax: (66‐2) 626‐6111
Phaholyothin Branch
Sindhorn Branch
Viphavadee Branch
2nd Floor, Sindhorn Tower 1, 130‐132 Wireless Road, Lumpini, Pathumwan, Bangkok 10330 Telephone: (66‐2) 627‐3550 Fax: (66‐2) 627‐3582, 627‐3600
G Floor, Lao Peng Nguan 1 Bldg., 333 Soi Cheypuand, Viphavadee‐Rangsit Road, Ladyao, Jatujak, Bangkok 10900 Telephone: (66‐2) 013‐8600 Fax: (66‐2) 618‐8569
BangKhae Branch
Chiang Mai Branch
Pak Chong Branch
999/9 The Offices at Central World, 16th Fl., Rama 1 Rd, Pathumwan, Bangkok 10330 Telephone: (66‐2) 264‐5888 Fax: (66‐2) 264 5899
1291/1, Shinnawatra Tower II, 3rd Floor, Phaholyothin Road, Phayathai, Bangkok 10400 Telephone: (66‐2) 686‐1500 Fax: (66‐2) 686‐1666
Ploenchit Branch
518 The Mall Group Building Bangkhae Branch, 6th Floor, Petchkasem Road, North Bangkhae, Bangkhae, Bangkok 10160 Telephone: (66‐2) 454‐9979 Fax: (66‐2) 454‐9970
422/49 Changklan Road, Changklan Subdistrict, Amphoe Meuang, Chiang Mai 50100 Telephone: (053) 270‐072 Fax: (053) 272‐618
173 175, Mittapap Road, Nong Sarai, Pak Chong, Nakhon Ratchasima 30130 Telephone: (044) 279‐511 Fax: (044) 279‐574
Korat Branch
Khon Kaen Branch
Chonburi Branch
624/9 Changphuek Road, T.Naimaung, A.Maung, Nakhon Ratchasima 30000 Telephone: (044) 247222 Fax: (044) 247171
5th Floor, Charoen Thani Princess Hotel, 260 Srichan Road, T. Naimuang, A. Muang, Khon Kaen 40000 Telephone: (043) 389‐171‐193 Fax: (043) 389‐209
4th Floor, Forum Plaza Bldg., 870/52 Sukhumvit Road, T. Bangplasoy, A. Muang, Cholburi 20000 Telephone: (038) 287‐635 Fax: (038) 287‐637
Pattaya Branch
Chachoengsao Branch
Hat Yai Branch
Easy Point 2, 392/65 Moo.9, T.Nong Prue, A. Bang Lamung, Chonburi 20260 Telephone: (038) 420‐965 Fax: (038) 420‐968
108/34‐36 Mahajakkrapad Road, T.Namuang, A.Muang, Chachoengsao 24000 Telephone: (038) 813‐088 Fax: (038) 813‐099
200/301, 200/303 JULDIS HATYAI PLAZA Floor 3 , Niphat‐Uthit 3 Rd, Hatyai Songkhla 90110 Telephone: (074) 355530‐3 Fax: (074) 355534
Phuket Branch
22/61‐63, Luang Por Wat Chalong Road, Talat Yai, Mueang Phuket, Phuket 83000 Telephone: (076) 222‐811, (076) 222‐683 Fax: (076) 222‐861
Phitsanulok Branch
227/171 Borom Trilokkanat Road, Muang, Phitsanulok 65000 Telephone: 055‐219‐255 to 8 Fax: 055‐219‐259
Nakhon Pathom
Cyber Branch Ayutthaya
Cyber Branch @ North Nana
Cyber Branch Chiangrai
KrungThai Bank, Rojana Branch 253 Moo 5, Rojana Road, Phai Ling, Phra Nakhon Si Ayutthaya, Phra Nakhonsi Ayutthaya, 13000 Telephone: 035‐242‐477 Fax: 035‐242‐476
Krung Thai Bank PCL, 2 Floor, North Nana Branch 35 Sukhumvit Rd., Klong Toey Nua Subdistrict , Wattana District , Bangkok 10110 Telephone: 083‐490‐2871
River Hotel (Building 3rd),1156 Petchakasem Road, Sanamchan Subdistrict, Amphoe Meuang , Nakhon Pathom Province 73000 Telephone: (034) 271300 Fax: (034) 271300 #100
KrungThai Bank, Hayaek Phokhun Mengrai Branch 116/19 Moo 19, Highway 110 Road, Rop Wiang, Mueang Chiang Rai, Chiang Rai, 57000 Telephone: 053‐715‐067 Fax: 053‐715‐068
Company Update
Close Bt174.50
Banking
Earnings upgrade/Earnings downgrade/Overview unchanged
February 1, 2017
Improving outlook for 2017 Price Performance (%)
2017 financial targets BBL provided the bank’s key financial targets for 2017, which highlight a more comfortable operating environment for 2017E vs. 2016; see Figure 1. This is especially in regard to an improving loan growth outlook, stable or slight NIM improvement and a more stable NPL situation vs. 2016. The bank still expects the NPL situation to be manageable given its solid balance sheet as well as the easing concern over the digital TV case. However, the fee income growth target of 5% will be the biggest challenge, in our view, given the potential impact from the PromptPay program this year. The impact will depend on the migration rate, with gradual migration expected in the early stage.
Source: SET Smart
FY16
FY17
Consensus EPS (Bt)
18.466
20.145
KT ZMICO vs. consensus Share data
‐1.8%
0.9%
Reuters / Bloomberg
BBL.BK/BBL TB
Paid‐up Shares (m)
1,908.84
Par (Bt)
10.00
Market cap (Bt bn / US$ m)
333.00/9,463.00
Foreign limit / actual (%)
25.00/29.48
52 week High / Low (Bt)
182.00/146.00
Avg. daily T/O (shares 000)
4,932.00
NVDR (%)
33.11
Estimated free float (%)
97.24
Beta
1.12
URL
www.bbl.co.th
CGR
Anti‐corruption
Level 4 (Certified)
Prapharas Nonthapiboon Analyst, no 17836 [email protected] 66 (0) 2695‐5872
Switch to Outperform on appealing valuation and solid balance sheet We switch our rating for BBL to Outperform from Underperform following our slight earnings upgrade. We see BBL being well positioned and prepared to handle the headwinds and challenges given its healthier balance sheet cushion vs. peers. Moreover, its attractive valuation (with 2017E P/BV of just 0.85x vs. the sector average of ~1.1x) remains its main price appeal.
2017’s main strategies and opportunities Regarding the 2017 outlook, BBL highlighted that it sees gradual improvement in domestic loan demand backed by the government’s stimulus measures. It continues to expand its housing loan base given its low base. Moreover, BBL continues to see opportunities and advantages in three main areas, including regionalization, urbanization and digitalization over the long term. It is also in preparations for gearing toward a digital banking platform over the long term. Raise 2017‐18E earnings estimates by 1‐3% We fine‐tuned our earnings estimates with the bank’s latest guidance and results (especially in regard to the better‐than‐expected NIM). We raised our net profit (NP) estimate for 2017E by 1% and 2018E by 3%. The main revision is higher NIM given that BBL will still benefit from deposit re‐pricing in 2017E vs. other banks due to its longer deposit duration compared to peers. At the same time, we also lowered our net fee income growth forecast to factor in the potential impact of the PromptPay program that started on 27 Jan‐17. Note also that the bank’s cost‐to‐income ratio is likely to decline in 2017 vs. 2016 when it booked an extra provision for contingencies (>Bt3bn) in the other expense item for the Thai TV and CTH‐GMM‐Fox cases. Following our NP revision, we raised our 17E target price to Bt185/share from Bt180/share for implied target P/BV of 0.9x. Financials and Valuation FY Ended 31 Dec PPOP (Btmn) Net Profit (Btmn) EPS (Bt) EPS Growth (%) Book value (Bt) Dividend (Bt) FY Ended 31 Dec PER (X) PBV (X) Div. Yield (%) ROE (%)
2015 35,680 34,181 17.91 ‐6% 189.56 6.50 2015 9.75 0.92 3.72 10%
2016 37,888 31,815 16.67 ‐7% 198.56 6.50 2016 10.47 0.88 3.72 9%
2017E 41,958 34,619 18.14 9% 204.55 6.50 2017E 9.62 0.85 3.72 9%
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 1 of 5
2018E 44,892 38,814 20.33 12% 218.97 6.71 2018E 8.58 0.80 3.85 10%
2019E 48,323 44,295 23.21 14% 236.07 6.96 2019E 7.52 0.74 3.99 10%
Figure 1: BBL’s financial targets for 2017 vs. our forecasts Financial targets Loan growth (%) Net fee income growth Net interest margin (NIM)
2015 Actual 4.9% 10.8%
2016E Bank's targets 3‐5% 8% (+/‐)
2016 Actual 3.9% 1.8%
2017E Bank's targets 4‐6% 5.0%
2017E KTZ's forecasts 5.0% 2.0%
2.16%
2.2% (+/‐)
2.32%
Maintain
2.34%
Cost to Income
43.8%
~45%
47.7%
45% (+/‐)
45.9%
NPL/loans
2.80%
3.2‐3.3%
3.22%
Maintain
3.25%
Provision (Btbn)
14.7
~15bn
15.7
Near 2016 level
16.9
Provision (bps of loans)
0.78
Not disclosed
0.81
Not disclosed
0.83
Source: KT ZMICO Research Note: 2017 bank’s targets were announced on 31 Jan‐17 and based on a 17 GDP growth forecast of 3‐4%.
Figure 2: Key changes in our earnings revision 2017E
Key assumption changes Net profit (Btmn) % Change in net profit from previous foreca % Change in net profit YoY Provision for loan loss (Btmn) Provision for loan loss (% to loans) Net fee income growth (%) Net interest margin (NIM) Cost to income ratio
New 34,619 1% 9% 16,916 0.83% 2% 2.34% 45.9%
2018E Previous 34,384
New 38,814 3% 12% 17,010 0.78% 5% 2.36% 45.1%
16,641 0.80% 8% 2.25% 45.7%
Previous 37,831
17,805 0.80% 9% 2.30% 44.8%
Source: KT ZMICO Research
Figure 3: BBL's P/BV band and sensitivity of market prices based on P/BV at different standard deviation levels (X)
2017E
1.8 +2 S.D.
1.6
+2.0SD
1.61
330
89
+1.5SD
1.50
308
76
+0.5 S.D.
+1.0SD
1.39
285
63
-0.5 S.D.
+0.5SD
1.28
263
50
-1 S.D.
Average
1.17
240
38
-1.5 S.D.
-0.5SD
1.06
217
25
-2 S.D.
-1.0SD
0.95
195
12
-1.5SD
0.84
172
-1
-2.0SD
0.73
150
-14
-2.5SD
0.62
127
-27
Avg.
Jan-17
Jan-16
Jan-15
Jan-14
Jan-13
Jan-12
Jan-11
Jan-10
Jan-09
Jan-08
Jan-07
Jan-06
Source: Bloomberg, KT ZMICO Research
Figure 4: BBL's PER band and sensitivity of market prices based on PER at different standard deviation levels (X)
2017E
14.0
PER (x) Implied market
+2 S.D.
13.0
+1.5 S.D.
12.0 11.0
Upside/ Downside
price (Bt)
to current price (%)
+1 S.D.
+2.0SD
13.0
236
35
+0.5 S.D.
+1.5SD
12.4
225
29
Avg.
10.0
-0.5 S.D.
+1.0SD
11.7
213
22
9.0
-1 S.D. -1.5 S.D.
+0.5SD
11.1
201
15
Average
10.4
189
8
-2 S.D.
8.0
153
-12
7.8
141
-19
-2.5SD
7.1
128
-26
Source: Bloomberg, KT ZMICO Research
Jan-17
8.4
-2.0SD
Jan-16
-1.5SD
Jan-15
5.0
Jan-14
-6
Jan-13
165
Jan-12
9.1
Jan-11
-1.0SD
Jan-10
1
6.0
Jan-09
177
Jan-08
9.7
Jan-07
-0.5SD
Jan-06
7.0
Jan-05
-2.5S.D.
Jan-05
0.6
to current price (%)
+1 S.D.
1.2
0.8
Upside/ Downside
price (Bt)
+1.5 S.D.
1.4
1.0
PBV (x) Implied market
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 2 of 5
Statement of Comprehensive Income (Btmn) Year‐end 31 Dec Total Interest Income
2015 2016 2017E 2018E 2019E 103,814 102,443 106,407 114,979 130,091
Total Interest Expenses
46,304
38,445
37,398
40,844
49,948
Net Interest Income
57,510
63,998
69,009
74,135
80,143
Net Fee and Service income
24,071
24,492
24,982
26,231
28,067
Gain on trading and FX transactions
7,774
7,459
7,496
7,871
8,422
Other Income Total Non‐Interest Income
13,374
9,908
9,857
11,231
11,601
45,218
41,860
42,335
45,333
48,090
Operating Income
102,728
105,858
111,345
119,468
128,233
Personnel Expenses
24,227
25,247
26,762
28,100
29,786
Premises and Equipment Expenses
9,458
9,909
10,602
11,239
11,913
Other Expenses Total Operating Expenses
11,360
15,349
13,712
14,533
15,803
45,045
50,505
51,077
53,871
57,502
Operating Profit
44,310
45,444
50,411
54,366
59,130 ‐
Extraordinary Items
‐
‐
‐
‐
Provision for Loan Losses
14,654
15,728
16,916
17,010
15,309
Taxation
8,630
7,556
8,454
9,474
10,807
Minority Interests Net Profit
(220) (254) (279) (299) (320) 34,181
31,815
34,619
38,814
44,295
EPS (Bt) Pre Provisioning Operating Profit (PPOP) Pre Provisioning Profit (PPP)
17.91 35,680 48,834
16.67 37,888 47,543
18.14 41,958 51,535
20.33 44,892 55,823
23.21 48,323 59,604
2015
2016
Cash
61,432
66,338
67,665
69,018
70,399
Interbank & Money Market
372,007
394,612
414,343
435,060
456,813
Statement of Financial Position (Btmn) Year‐end 31 Dec
2017E
2018E
2019E
Assets
REPO
‐
‐
‐
‐
‐
Net Investment in Securities
520,805
547,941
575,299
632,720
695,882 2,355,195
Loans
1,868,903
1,941,093
2,038,106
2,180,741
Accrued Interest Receivables
4,279
4,653
4,891
5,234
5,652
Loans & Accrued Int.Rec.
1,873,182
1,945,746
2,042,998
2,185,975
2,360,847
Less: Loan Loss Reserves
(104,187) (119,518) (132,044) (142,768) (149,695)
Net Loans and Receivables
1,768,995
1,826,227
1,910,954
2,043,207
2,211,153
Properties Foreclosed
13,579
12,262
11,036
9,933
8,939
Premises and Equipment, Net
46,108
45,231
46,587
47,985
48,945
Other Assets
52,926
51,617
53,685
56,468
58,693
Total Assets
2,835,852
2,944,230
3,079,568
3,294,392
3,550,823
2,090,965
2,178,141
2,302,730
2,480,041
2,693,324
Liabilities & Equity Total Deposits Interbank & Money Market
128,681
130,928
124,382
128,113
131,956
Total Borrowings
138,403
137,815
137,126
136,441
135,758
Other Liabilities
115,772
118,101
124,622
131,531
138,854
Total Liabilities
2,473,821
2,564,985
2,688,860
2,876,126
3,099,893
Paid‐up Capital (Bt10 Par)
19,088
19,088
19,088
19,088
19,088
Premium on Share Capital
56,346
56,346
56,346
56,346
56,346
Retained Earnings
120,974
135,842
140,177
160,583
186,070
Other reserves
86,500
91,500
96,500
101,500
106,500
Other Equity Items
78,924
76,239
78,344
80,471
82,620
Total Shareholders' Equity Source: KTZMICO Research
361,832
379,016
390,456
417,989
450,625
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 3 of 5
Valuation and Ratio Analysis Year‐end 31 Dec
2015
2016
2017E
2018E
2019E
17.91
16.67
18.14
20.33
23.21
Per share Data (Bt) EPS DPS
6.50
6.50
6.50
6.71
6.96
189.56
198.56
204.55
218.97
236.07
Multiplier (X) PER
9.75
10.47
9.62
8.58
7.52
P/BV
0.92
0.88
0.85
0.80
0.74
Dividend yield (%)
3.72
3.72
3.72
3.85
3.99
Net Profit
‐5.9%
‐6.9%
8.8%
12.1%
14.1% 14.1%
BVPS
Growth (%) EPS
‐5.9%
‐6.9%
8.8%
12.1%
Net Interest Income
‐2.5%
11.3%
7.8%
7.4%
8.1%
Non Interest Income
27.8%
‐7.4%
1.1%
7.1%
6.1%
Net Fee & Service Income Operating Income
10.8%
1.8%
2.0%
5.0%
7.0%
8.8%
3.0%
5.2%
7.3%
7.3%
Operating Expenses
4.5%
12.1%
1.1%
5.5%
6.7%
Pre Provisioning Operating Profit (PPOP) Pre Provisioning Profit (PPP) Loans Deposits
3.1% 34.4% 4.9% 1.6%
6.2% ‐2.6% 3.9% 4.2%
10.7% 8.4% 5.0% 5.7%
7.0% 8.3% 7.0% 7.7%
7.6% 6.8% 8.0% 8.6%
Gross NPLs
24.8%
22.4%
8.1%
0.1%
‐6.3%
56,226
68,841
74,388
74,473
69,797
2.8%
3.2%
3.3%
3.0%
2.7%
Loan Loss Reserve/NPLs
185.3%
173.6%
177.5%
191.7%
214.5%
Accrued Interest/Loans
0.2%
0.2%
0.2%
0.2%
0.2%
Loan Loss Reserve/Loans
5.6%
6.2%
6.5%
6.5%
6.4%
Property Foreclosed/Loans
0.7%
0.6%
0.5%
0.5%
0.4%
Equity/Asset
12.8%
12.9%
12.7%
12.7%
12.7%
Tier I to Risk Assets
15.8%
16.4%
16.7%
16.7%
16.7%
Capital Adequacy Ratio (CAR)
17.9%
18.3%
18.5%
18.4%
18.3%
Loan to Deposit Ratio (LDR)
89.4%
89.1%
88.5%
87.9%
87.4%
Loan to Deposit and Borrowings
83.8%
83.8%
83.5%
83.3%
83.2%
Financial ratios Gross NPLs (Btmn) Gross NPL/Loans
Capital & Liquidity Ratio
Profitability Ratio ROA
1.2%
1.1%
1.1%
1.2%
1.3%
ROE
10.0%
8.6%
9.0%
9.6%
10.2%
Cost to Income
43.8%
47.7%
45.9%
45.1%
44.8%
Non Interest Income/Total Income
44.0%
39.5%
38.0%
37.9%
37.5%
Net Interest Margin (NIM)
2.16%
2.32%
2.34%
2.36%
2.37%
2015
2016
2017E
2018E
2019E
Key Assumptions Loan Growth ‐ Net Net Fee Income Growth
4.9%
3.9%
5.0%
7.0%
8.0%
10.8%
1.8%
2.0%
5.0%
7.0%
Cost to Income
43.8%
47.7%
45.9%
45.1%
44.8%
Net Interest Margin
2.16%
2.32%
2.34%
2.36%
2.37%
Provision expenses (Btmn) Provision (% of loans) Source: KTZMICO Research
14,654 15,728 16,916 17,010 15,309 0.78% 0.81% 0.83% 0.78% 0.65%
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 4 of 5
Note: KT ZMICO has two major shareholders, Krungthai Bank PLC (KTB) and Seamico Securities PLC (ZMICO). Therefore, prior to making investments in the securities of KTB and ZMICO, investors should consider the risk factors carefully. An executive of KT ZMICO Securities is also a board member of BCP, BTC, CI, CPI, KBS, MAJOR, MK, PACE, PSL, SVH, VNG, ZMICO, SAWAD, TFG. A management member of KT ZMICO Securities is also a board member of BTC and NFC. KT ZMICO is a financial advisor for U, LOXLEY, ZMICO, MAKRO, CPALL, SAFARI, M‐CHAI, CRANE, TFD. KT ZMICO is a co underwriter of RPH.
Corporate Governance Report (CGR) Source: Sec, Thai Institute of Directors Association (IOD) Excellent (scores: 90 ‐ 100) Very Good (scores: 80 – 89) Good (scores: 70 – 79)
Satisfactory (scores: 60 – 69) Pass (scores: 50 – 59) No Logo N/A (scores: below 50)
Anti‐corruption Progress Indicator Source: Sec, Thailand's Private Sector Collective Action Coalition Against Corruption programme (Thai CAC)
Level 1 (Committed) : Organization’s statement or board's resolution to work against corruption and to be in compliance with all relevant laws. Level 2 (Declared) : Public declaration statement to participate in Thailand's private sector Collective Action Coalition Against Corruption (CAC) or equivalent initiatives Level 3 (Established) : Public out preventive measures, risk assessment, communication and training for all employees, including consistent monitoring and review processes Level 4 (Certified) : Audit engagement by audit committee or auditors approved by the office of SEC, and receiving certification or assurance by independent external assurance providers (CAC etc.) Level 5 (Extended) : Extension of the anti‐corruption policy to business partners in the supply chain, and disclosure of any current investigations, prosecutions or closed cases Insufficient or not clearly defined policy Data not available / no policy
DISCLAIMER This document is produced using open sources believed to be reliable. However, their accuracy and completeness cannot be guaranteed. The statements and opinions herein were formed after due and careful consideration for use as information for the purposes of investment. The opinions contained herein are subject to change without notice. This document is not, and should not be construed as, an offer or the solicitation of an offer to buy or sell any securities. The use of any information contained in this document shall be at the sole discretion and risk of the user.
KT ZMICO RESEARCH – RECOMMENDATION DEFINITIONS STOCK RECOMMENDATIONS
SECTOR RECOMMENDATIONS
BUY: Expecting positive total returns of 15% or more OVERWEIGHT: The industry, as defined by the analyst's over the next 12 months coverage universe, is expected to outperform the relevant OUTPERFORM: Expecting total returns between ‐10% primary market index by at least 10% over the next 12 months. to +15%; returns expected to exceed market returns NEUTRAL: The industry, as defined by the analyst's coverage over a six‐month period due to specific catalysts universe, is expected to perform in line with the relevant UNDERPERFORM: Expecting total returns between primary market index over the next 12 months. ‐10% to +15%; returns expected to be below market UNDERWEIGHT: The industry, as defined by the analyst's returns over a six‐month period due to specific coverage universe, is expected to underperform the relevant catalysts primary market index by 10% over the next 12 months. SELL: Expecting negative total returns of 10% or more over the next 12 months
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 5 of 5
KT ZMICO Securities Company Limited Head Office
WWW.KTZMICO.COM
8th, 15th‐17th,19th, 21st Floor, Liberty Square Bldg., 287 Silom Road, Bangrak, Bangkok, Thailand 10500 Telephone: (66‐2) 695‐5000 Fax: (66‐2) 695‐5173 KT ZMICO Connect 662 695 5555
Central World Branch
Amarin Branch
22nd Floor, Amarin Building, 496‐502 Ploenchit Road, Lumpini, Pathumwan, Bangkok 10330 Telephone: (66‐2) 018‐6200 Fax: (66‐2) 018‐6298, (66‐2) 018‐6299
8th Floor, Ton Son Tower, 900 Ploenchit Road, Lumpini, Pathumwan, Bangkok 10330 Telephone: (66‐2) 626‐6000 Fax: (66‐2) 626‐6111
Phaholyothin Branch
Sindhorn Branch
Viphavadee Branch
2nd Floor, Sindhorn Tower 1, 130‐132 Wireless Road, Lumpini, Pathumwan, Bangkok 10330 Telephone: (66‐2) 627‐3550 Fax: (66‐2) 627‐3582, 627‐3600
G Floor, Lao Peng Nguan 1 Bldg., 333 Soi Cheypuand, Viphavadee‐Rangsit Road, Ladyao, Jatujak, Bangkok 10900 Telephone: (66‐2) 013‐8600 Fax: (66‐2) 618‐8569
BangKhae Branch
Chiang Mai Branch
Pak Chong Branch
999/9 The Offices at Central World, 16th Fl., Rama 1 Rd, Pathumwan, Bangkok 10330 Telephone: (66‐2) 264‐5888 Fax: (66‐2) 264 5899
1291/1, Shinnawatra Tower II, 3rd Floor, Phaholyothin Road, Phayathai, Bangkok 10400 Telephone: (66‐2) 686‐1500 Fax: (66‐2) 686‐1666
Ploenchit Branch
518 The Mall Group Building Bangkhae Branch, 6th Floor, Petchkasem Road, North Bangkhae, Bangkhae, Bangkok 10160 Telephone: (66‐2) 454‐9979 Fax: (66‐2) 454‐9970
422/49 Changklan Road, Changklan Subdistrict, Amphoe Meuang, Chiang Mai 50100 Telephone: (053) 270‐072 Fax: (053) 272‐618
173 175, Mittapap Road, Nong Sarai, Pak Chong, Nakhon Ratchasima 30130 Telephone: (044) 279‐511 Fax: (044) 279‐574
Korat Branch
Khon Kaen Branch
Chonburi Branch
624/9 Changphuek Road, T.Naimaung, A.Maung, Nakhon Ratchasima 30000 Telephone: (044) 247222 Fax: (044) 247171
5th Floor, Charoen Thani Princess Hotel, 260 Srichan Road, T. Naimuang, A. Muang, Khon Kaen 40000 Telephone: (043) 389‐171‐193 Fax: (043) 389‐209
4th Floor, Forum Plaza Bldg., 870/52 Sukhumvit Road, T. Bangplasoy, A. Muang, Cholburi 20000 Telephone: (038) 287‐635 Fax: (038) 287‐637
Pattaya Branch
Chachoengsao Branch
Hat Yai Branch
Easy Point 2, 392/65 Moo.9, T.Nong Prue, A. Bang Lamung, Chonburi 20260 Telephone: (038) 420‐965 Fax: (038) 420‐968
108/34‐36 Mahajakkrapad Road, T.Namuang, A.Muang, Chachoengsao 24000 Telephone: (038) 813‐088 Fax: (038) 813‐099
200/301, 200/303 JULDIS HATYAI PLAZA Floor 3 , Niphat‐Uthit 3 Rd, Hatyai Songkhla 90110 Telephone: (074) 355530‐3 Fax: (074) 355534
Phuket Branch
22/61‐63, Luang Por Wat Chalong Road, Talat Yai, Mueang Phuket, Phuket 83000 Telephone: (076) 222‐811, (076) 222‐683 Fax: (076) 222‐861
Phitsanulok Branch
227/171 Borom Trilokkanat Road, Muang, Phitsanulok 65000 Telephone: 055‐219‐255 to 8 Fax: 055‐219‐259
Nakhon Pathom
Cyber Branch Ayutthaya
Cyber Branch @ North Nana
Cyber Branch Chiangrai
KrungThai Bank, Rojana Branch 253 Moo 5, Rojana Road, Phai Ling, Phra Nakhon Si Ayutthaya, Phra Nakhonsi Ayutthaya, 13000 Telephone: 035‐242‐477 Fax: 035‐242‐476
Krung Thai Bank PCL, 2 Floor, North Nana Branch 35 Sukhumvit Rd., Klong Toey Nua Subdistrict , Wattana District , Bangkok 10110 Telephone: 083‐490‐2871
River Hotel (Building 3rd),1156 Petchakasem Road, Sanamchan Subdistrict, Amphoe Meuang , Nakhon Pathom Province 73000 Telephone: (034) 271300 Fax: (034) 271300 #100
KrungThai Bank, Hayaek Phokhun Mengrai Branch 116/19 Moo 19, Highway 110 Road, Rop Wiang, Mueang Chiang Rai, Chiang Rai, 57000 Telephone: 053‐715‐067 Fax: 053‐715‐068
