Banking - Global Alliance Partners
Banking Industry Update
Overweight
22 December 2014
Well‐positioned for the next up‐cycle
Share data (Banking) SET index
1,514.35
Sector index
596.65
52‐week high
641.83
52‐week low
427.61
Market capitalization (Bt m)
2,436,506.84
% of market cap
17.46
Avg daily turnover (m shares)
318.73
Beta
1.35
Sector Performance (%)
1M
3M
12M
Absolute
‐4.12
‐5.08
25.67
Relative
‐0.12
‐0.37
10.14
Note: KT•ZMICO is a partnership between KTB and ZMICO
Valuations in comfort zone for L‐T investment perspective We are maintaining our Overweight stance for the banking sector given that banks will be the main beneficiary of the economic recovery. Moreover, the current valuations are near the low band of the up‐cycle economy and have become attractive from an L‐T investment perspective. Our top picks remain KBANK and SCB, while TMB is attractive for a trading stance on the M&A theme. Nov‐14 loans grew by 0.6% MoM and 1.4% YTD Banks (excluding KTB) showed loan growth of 0.6% MoM with KBANK, SCB and BAY recording higher growth. We still expect sector loan growth for 2014 to be near our forecast of 4.8% as loans normally enter the high season in 4Q, especially in Dec., despite 1.4% growth YTD. 2015E investment thesis For the 2015 outlook, we expect a faster economic turnaround with projected GDP growth of 4% vs. 0.8% for 2014. The main driver for 1H15 will be consumption play (except for the auto‐related sector), which should largely benefit banks with a higher non‐interest income base (especially KBANK and SCB), while CAPEX play should follow in 2H15. 2015‐16E earnings outlooks remain solid We expect the sector’s net profit growth at 5% in 2014E, 11% in 2015E and 14% in 2016E with normalized profit growth at 9%, 9% and 11%, respectively. Key NP growth drivers for 2014‐15E are solid growth in loans and fee income, as well as lower credit cost and cost‐to‐income ratios.
Prapharas Nonthapiboon Analyst, no 17836 [email protected] 66 (0) 2695‐5872
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 1 of 9
Nov‐14 loans grew by 0.6% MoM and 1.4% YTD Banks under our coverage (excluding KTB) showed loan growth of 0.6% MoM. The growth MoM was still driven mainly by corporate loans and SME loans, with KBANK (+1.4%), SCB (+1.1%) and BAY (+1.0%) recording higher MoM growth in this month. Meanwhile, banks with high exposure to auto loans continued to see a loan contraction MoM (~‐1% MoM for both TCAP and KKP). The exception was TISCO, which showed slight growth of 0.2% MoM as there was some draw down of project finance loans in the real estate sector and SME loans for car dealers (floor plan segment) to prepare for the motor expo in Dec‐14. However, TISCO’s retail loans continued to decline by ~1% MoM. Although the sector’s loan growth stood at just 1.4% YTD during 11M14, we still expect sector loan growth for 2014E (especially larger banks) to be near our loan growth forecast of 4.8% as loans normally enter the high season in 4Q, especially in December and in the agricultural and SME segments. Note that loans in 4Q grew at an average of 4% QoQ in the past seven years (e.g., +7% in 4Q10, +4% in 4Q11, +4% in 4Q12 and +3% in 4Q13). Figure 1: Banks’ loans vs. growth Bank only
Change MoM (Btmn)
Loans (Btmn)
Change MoM (%)
Change
Change YTD Banks' Targets KTZ (%)
basis
Nov 14
Sept 14
Oct 14
Nov 14
Sept 14
Oct 14
Nov 14
YoY (%)
11M14 (%)
14E (%)
BBL
1 ,6 9 7 ,6 2 8
(3 9 ,3 6 1 )
6 ,9 1 9
(2 3 8 )
-2 .3 %
0 .4 %
-0 .0 1 %
3 .1 %
-0 .5 %
3 -5
6
8
KTB
1 ,8 0 3 ,8 4 0
(3 ,8 9 2 )
970
N .A .
-0 .2 %
0 .1 %
N .A .
7 .8 % * *
5 .0 % * *
~5
10
12
KBA NK
1 ,5 2 0 ,4 0 5
1 1 ,5 7 8
1 4 ,2 7 8
2 1 ,5 7 3
0 .8 %
1 .0 %
1 .4 %
8 .4 %
6 .7 %
Overweight
22 December 2014
Well‐positioned for the next up‐cycle
Share data (Banking) SET index
1,514.35
Sector index
596.65
52‐week high
641.83
52‐week low
427.61
Market capitalization (Bt m)
2,436,506.84
% of market cap
17.46
Avg daily turnover (m shares)
318.73
Beta
1.35
Sector Performance (%)
1M
3M
12M
Absolute
‐4.12
‐5.08
25.67
Relative
‐0.12
‐0.37
10.14
Note: KT•ZMICO is a partnership between KTB and ZMICO
Valuations in comfort zone for L‐T investment perspective We are maintaining our Overweight stance for the banking sector given that banks will be the main beneficiary of the economic recovery. Moreover, the current valuations are near the low band of the up‐cycle economy and have become attractive from an L‐T investment perspective. Our top picks remain KBANK and SCB, while TMB is attractive for a trading stance on the M&A theme. Nov‐14 loans grew by 0.6% MoM and 1.4% YTD Banks (excluding KTB) showed loan growth of 0.6% MoM with KBANK, SCB and BAY recording higher growth. We still expect sector loan growth for 2014 to be near our forecast of 4.8% as loans normally enter the high season in 4Q, especially in Dec., despite 1.4% growth YTD. 2015E investment thesis For the 2015 outlook, we expect a faster economic turnaround with projected GDP growth of 4% vs. 0.8% for 2014. The main driver for 1H15 will be consumption play (except for the auto‐related sector), which should largely benefit banks with a higher non‐interest income base (especially KBANK and SCB), while CAPEX play should follow in 2H15. 2015‐16E earnings outlooks remain solid We expect the sector’s net profit growth at 5% in 2014E, 11% in 2015E and 14% in 2016E with normalized profit growth at 9%, 9% and 11%, respectively. Key NP growth drivers for 2014‐15E are solid growth in loans and fee income, as well as lower credit cost and cost‐to‐income ratios.
Prapharas Nonthapiboon Analyst, no 17836 [email protected] 66 (0) 2695‐5872
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 1 of 9
Nov‐14 loans grew by 0.6% MoM and 1.4% YTD Banks under our coverage (excluding KTB) showed loan growth of 0.6% MoM. The growth MoM was still driven mainly by corporate loans and SME loans, with KBANK (+1.4%), SCB (+1.1%) and BAY (+1.0%) recording higher MoM growth in this month. Meanwhile, banks with high exposure to auto loans continued to see a loan contraction MoM (~‐1% MoM for both TCAP and KKP). The exception was TISCO, which showed slight growth of 0.2% MoM as there was some draw down of project finance loans in the real estate sector and SME loans for car dealers (floor plan segment) to prepare for the motor expo in Dec‐14. However, TISCO’s retail loans continued to decline by ~1% MoM. Although the sector’s loan growth stood at just 1.4% YTD during 11M14, we still expect sector loan growth for 2014E (especially larger banks) to be near our loan growth forecast of 4.8% as loans normally enter the high season in 4Q, especially in December and in the agricultural and SME segments. Note that loans in 4Q grew at an average of 4% QoQ in the past seven years (e.g., +7% in 4Q10, +4% in 4Q11, +4% in 4Q12 and +3% in 4Q13). Figure 1: Banks’ loans vs. growth Bank only
Change MoM (Btmn)
Loans (Btmn)
Change MoM (%)
Change
Change YTD Banks' Targets KTZ (%)
basis
Nov 14
Sept 14
Oct 14
Nov 14
Sept 14
Oct 14
Nov 14
YoY (%)
11M14 (%)
14E (%)
BBL
1 ,6 9 7 ,6 2 8
(3 9 ,3 6 1 )
6 ,9 1 9
(2 3 8 )
-2 .3 %
0 .4 %
-0 .0 1 %
3 .1 %
-0 .5 %
3 -5
6
8
KTB
1 ,8 0 3 ,8 4 0
(3 ,8 9 2 )
970
N .A .
-0 .2 %
0 .1 %
N .A .
7 .8 % * *
5 .0 % * *
~5
10
12
KBA NK
1 ,5 2 0 ,4 0 5
1 1 ,5 7 8
1 4 ,2 7 8
2 1 ,5 7 3
0 .8 %
1 .0 %
1 .4 %
8 .4 %
6 .7 %
