Banking
Banking Industry Update
Overweight
13 March 2015
Rate cut impacts
Share data (Banking) SET index
1,544.34
Sector index
604.79
52‐week high
688.00
52‐week low
488.48
Market capitalization (Bt m)
2,526,150.33
% of market cap
17.45
Avg daily turnover (m shares)
317.23
Beta
1.46
Sector Performance (%)
1M
3M
12M
Absolute
‐3.88
1.23
20.02
Relative
‐0.73
‐0.68
7.02
Note: KT•ZMICO is a partnership between KTB and ZMICO
Prapharas Nonthapiboon Analyst, no 17836 [email protected] 66 (0) 2695‐5872
Rate cut to post slight downside risk to banks’ earnings We are maintaining our Overweight stance for the banking sector given that banks will be the prime gainers on the improving macro fronts. Our top picks remain KBANK, SCB and TMB. However, the rate cut impact and the potential for a weaker‐than‐expected economic growth may post some downside risk to banks’ earnings. The MPC voted 4‐3 to cut the rate by 25bps At the meeting on March 11, the Monetary Policy Committee (MPC) voted four to three to cut the policy rate by 25bps to 1.75%. The decision seemed to be a surprise to the market as only six analysts out of 22 had predicted it. SCB to follow lead of central bank Siam Commercial Bank (SCB) became the first commercial bank to follow the central bank's 25‐basis‐point rate cut. The bank trimmed its minimum lending rate (MLR) and fixed‐deposit rate by 20 basis points, effective on 12 Mar‐15, while keeping savings deposit rates unchanged. Expect banks 15E net profit to be hurt by 2‐3% from the rate cut Assuming a 25 bps policy rate cut and parallel rate cuts (20 bps cut in MLR and fixed deposit rate), we expect large to mid size banks’ net profit for 2015E to be hurt by 2‐3% with BBL and KTB to see a slightly higher impact (see figure 1). This will especially dampen NIM during 2Q‐ 3Q/15 as it takes around one or two quarters for deposits to be re‐ priced. The greater impact to BBL and KTB is due largely to the high influx of deposits since 4Q14 and higher net excess liquidity (~Bt440bn for BBL and Bt350bn for KTB as of Jan‐15) in the money market (figure 2). KBANK should see a lower impact among large banks on its more efficient NIM management. Gainers will be consumer finance and auto hire purchase operators The main gainers from the rate cut will be consumer finance firms (SAWAD, MTLS, KTC), with the potential positive impact to 2015E net profit expected to be around 2‐4%, as well as auto hire purchase operators (TCAP, TISCO, KKP), with an expected net potential positive impact to 2015E net profit of ~2% (figure 1). This should be thanks to their portfolio mixes with fixed rate loans constituting around 60‐90% of the total portfolio vs. around 30% for banks. Potential for weaker‐than expected economy may post some risk to banks’ earnings The rate cut coupled with the likelihood of slower‐than‐expected GDP growth could post some downside risk to the NIM and net profit forecasts for 2015E by around 5%.
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 1 of 6
Figure 1: Potential impact of rate cut Potential impact to 15E net profit (%) 25 bps policy rate cut Net impact of each 20 bps cut in fixed deposit rate and MLR Net impact Net impact (~10M15)* 25 bps policy rate cut (~10M15) (policy rate cut only)**
BBL ‐2.3% ‐1.5% ‐3.8% ‐3.1% ‐1.9%
KTB ‐1.6% ‐1.8% ‐3.4% ‐2.7% ‐1.3%
SCB KBANK ‐0.6% ‐0.2% ‐1.5% ‐1.7% ‐2.1% ‐1.9% ‐1.7% ‐1.5% ‐0.5% ‐0.2%
TMB ‐0.6% ‐2.8% ‐3.4% ‐2.7% ‐0.5%
TCAP ‐0.2% 2.1% 1.9% 1.6% ‐0.1%
TISCO ‐0.1% 2.0% 1.9% 1.5% ‐0.1%
KKP SECTOR 0.4% ‐0.9% 1.2% ‐1.4% 1.5% ‐2.4% 1.2% ‐1.8% 0.3% ‐0.8%
Current 2015E Net profit (Btmn) Net profit growth (%)
38,483 37,550 57,832 49,707 10,785 6% 13% 8% 8% 13%
5,629 10%
4,765 12%
3,899 208,650 48% 9%
Source: KT ZMICO Research * Net potential impacts of rate cut to 15 net profits assuming a 25 bps policy rate cut and parallel rate cuts (20 bps cut in MLR and fixed deposit rate) starting from around mid Mar‐15. ** Net potential impacts of rate cut to 15 net profits assuming only a 25 bps policy rate cut without other lending or deposit rate cut starting from around mid Mar‐15.
Figure 2: Net excess liquidity in the money market/assets (Jan‐15) (%)
18 16 14 12 10 8 6 4 2 0 -2 -4
16.7 12.9
6.7
7.3 4.8
BBL
KTB
SCB
TISCO
4.3
TMB
2.8
KBANK
KKP
TCAP
-2.1
-3.4
Sector
Source: Bank of Thailand, KT ZMICO Research
Figure 3: Net excess liquidity in the money markets (Jan‐15) Net excess liquidity in the money markets (Jan-15) BBL KTB SCB TISCO TMB KBANK KKP TCAP Sector
% to assets 16.7 12.9 6.7 4.8 4.3 2.8 -2.1 -3.4 7.3
Btmn 444,934 350,613 165,901 14,255 32,903 60,649 -4,679 -33,924 1,030,652
Source: Bank of Thailand, KT ZMICO Research
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 2 of 6
Figure 4: Rating and Valuation Summary Rating
Banks
Target Price 15E (Bt)
PER (X) 2014
P/BV (X)
2015E
BBL
Buy
245
KTB
Unrated
29.00
9.8
Buy
270
11.6
Buy Outperform
220 2.90
11.3 14.4
10.5 12.7
KBANK SC B TMB
10.1
2014
ROE (%)
2015E
2014
Div. yield (%)
2015E
2014
2015E 3.65
1.1
1.1
11.7
11.6
3.39
8.7
1.4
1.3
15.1
16.6
3.87
4.15
10.8
2.1
1.8
19.4
17.9
1.74
1.85
2.1 2.0
1.9 1.8
20.1 14.5
18.9 14.7
3.09 1.91
3.37 2.75
9.5
BAY
Underperform
42.00
28.9
23.0
3.1
2.8
11.1
12.8
1.04
1.30
KKP TC AP TISC O
Underperform Underperform Underperform
44.00 36.00 46.00
13.1 9.1 8.8
8.8 8.3 7.8
1.0 0.9 1.4
0.9 0.8 1.3
7.4 10.4 17.4
10.5 10.6 17.5
4.88 4.38 4.73
5.66 4.66 5.25
Sector
Overweight
12.2
11.0
1.8
1.6
15.3
15.2
3.14
3.26
Source: Bloomberg, KT ZMICO Research
Figure 5: Sensitivity of bank market prices based on P/BV at different standard deviation levels (SD) Market Price (Bt.)
12-Mar-15
+2.0SD +1.5SD +1SD +0.5SD Avg.
-0.5SD -1SD -1.5SD -2.0SD 2013-2015
Price P/BV(x)
High
Low
BAY
55.00
2.28
57
52
47
42
37
32
27
22
17
104
28
BBL
183.5
1.02
276
260
244
228
212
196
181
165
149
237
165
KBANK
225.00
1.81
310
288
266
244
222
200
178
156
134
252
146
KKP
38.00
0.84
62
57
51
46
40
35
29
24
18
71
34
KTB
23.00
1.25
33
30
27
24
21
18
15
12
10
28
15
SC B
176.50
1.84
260
245
230
214
199
184
168
153
137
200
131
TC AP
35.25
0.82
57
51
46
41
36
31
26
21
16
50
30
TISC O
46.25
1.29
75
69
63
58
52
46
40
35
29
61
35
3.00
1.69
4.07
3.70
3.34
2.97
2.60
2.24
1.87
1.50
1.14
3.24
1.87
604.8
1.7
762
710
657
604
551
498
446
393
340
688
428
TMB SETBANK
Source: Bloomberg, KT ZMICO Research
Figure 6: Banks’ share price performance & relative performance vs. SETBANK and SET C losed(Bt) SET BANK Banking BAY BBL KBANK KKP KTB SC B TC AP TISC O TMB LHBANK
2013 - 2015
12-Mar-15 High 1,544 1,643 605 688 55.00 183.50 225.00 38.00 23.00 176.50 35.25 46.25 3.00 1.97
104.00 237.00 252.00 71.25 27.75 199.50 50.25 60.75 3.24 2.28
Low 1,225 428 27.50 165.00 145.50 34.25 15.30 130.50 29.75 34.50 1.87 1.15
6 -20 -2 -4 -1 0 -1 -7 -1 -2 1 -2 1 -3 0 -1 -2 -5 -1 -2
26 -5 -5 -5 4 -4 8 8 1 -3
24 -5 -2 -4 0 -4 10 5 2 61
Relative to SETBA NK (%)
Relative to SET (%)
Price change (%) 1W 1M 1Q YTD -1 -4 14 3 0 -5 1 2
1Y 14 22
2Y High 1W 1M 1Q YTD -2 -6 0 -12 1 -1 -13 -1
54 4 31 -8 25 13 1 14 19 61
57 -19 5 -39 -12 -1 -22 -11 12 33
-47 -23 -11 -47 -17 -12 -30 -24 -7 -14
7 -16 13 -1 0 -19 -1 4 -19 0 -2 -19 -1 3 -10 1 3 -18 1 2 -5 1 4 -6 -1 -1 -13 0 2 -17
1Y 8
2Y High 1W 1M 2M 1Q YTD 1Y 2Y High 2
-6
21 40 59 -8 -10 -17 -5 17 7 -7 -22 -37 -3 11 -10 -7 -1 1 7 -12 -20 2 0 -9 -1 5 14 58 48 35
-41 -17 -5 -41 -11 -5 -24 -18 -1 -8
6 -15 -2 1 -2 5 -1 -1 -2 4 1 4 0 3 0 5 -2 0 -1 3
0 -2 0 -4 4 -2 10 2 1 2
25 -6 -6 -6 2 -5 7 7 -1 -5
Source: Bloomberg, KT ZMICO Research
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 3 of 6
22 32 57 -6 -18 -19 -3 9 5 -5 -29 -39 -1 3 -12 -5 -9 -1 9 -20 -22 3 -7 -11 0 -2 12 60 40 33
-35 -10 1 -35 -5 1 -18 -12 5 -2
Figure 7: P/BV of SETBANK P/BV (X)
3.6 3.2
Red‐shirt protest Fire at CTW (May‐10)
2.8 2.4
+2.0SD = 2.33x
2.0
+1.0SD = 1.99x +0.5SD = 1.82x
Up cycle economy
Mean = 1.64x
1.6-0.5SD = 1.47x -1.0SD = 1.30x
Jan-15
Jun-14
Nov-13
Apr-13
Sep-12
Feb-12
Jul-11
May-10
Oct-09
Mar-09
Aug-08
Jan-08
Jun-07
11 Mar 15 = 1.71x Great US recession/Airport Closure
Apr-06
Feb-05
Sep-05
Jul-04
Dec-03
May-03
Mar-02
Jan-01
Aug-01
0.4
Oct-02
Military Coup (19 Sept‐06) Yellow‐shirt protest (07)
Nov-06
0.8
Coup
EU-US Debt crisis Widespread Flood
-2.0SD = 0.95x
Dec-10
1.2
Source: Banks, KT ZMICO Research
Figure 8: SETBANK Index and PER Band (SETBANK Index) 1,000
Up cycle economy 15x
800
13x 600
11x 9x
400
7x
Coup 200
EU‐US Debt crisis Widespread Flood
-
Great US recession
Jan-15
Jan-14
Jan-13
Jan-12
Jan-11
Jan-10
Jan-09
Jan-08
Jan-07
Jan-06
Jan-05
Jan-04
Jan-03
Jan-02
-200
Source: Bloomberg, KT ZMICO Research
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 4 of 6
Figure 9: Valuations vs. regional peers Regional
NP growth(%)
Banks
2014E 2015E 2014E 2015E 2014E 2015E
C hina Hong Kong India Indonesia Korea Malaysia
7 -11 -2 -3 55 -1
PER (X)
5 13 18 16 3 7
P/BV (X)
Dividend yield (%) 2014E
2015E
ROE (%) 2014E 2015E
7.1 11.2 10.4 13.6 9.9 12.4
6.4 10.3 16.3 11.9 8.2 11.6
1.0 1.1 1.5 2.2 0.6 1.6
0.9 1.1 2.1 2.0 0.5 1.4
5.1 4.1 2.5 1.8 2.3 3.3
5.5 4.4 1.9 1.9 2.7 3.8
16.5 12.8 13.8 16.7 6.5 13.7
15.7 10.8 15.1 17.0 6.3 12.9
Philippines
-3
8
15.3
14.5
1.8
1.7
1.5
1.5
13.1
12.5
Singapore Thailand Regional
17 3 6.9
3 11 9.4
13.4 12.2 11.7
12.4 11.0 11.4
1.2 1.8 1.4
1.1 1.6 1.4
3.2 3.1 3.0
3.9 3.3 3.2
10.6 15.3 13.2
11.6 15.2 13.0
Source: Bloomberg, KT ZMICO Research
Figure 10: Valuations vs. regional peers 300 MSCI Asia Ex JP FIN
275 250
Thai Banks Index Indonesian Banks Index Singaporean Banks Index
225 200 175
Malaysian Banks Index Hong Kong Banks Index Korean Banks Index Philippine Banks Index
150 125 100 75
Jan-10 Mar-10 May-10 Jul-10 Sep-10 Nov-10 Jan-11 Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 May-13 Jul-13 Sep-13 Nov-13 Jan-14 Mar-14 May-14 Jul-14 Sep-14 Nov-14 Jan-15 Mar-15
50
Source: Bloomberg, KT ZMICO Research
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 5 of 6
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 BUY: Expecting positive total returns of 15% or more over the next 12 months OUTPERFORM: Expecting total returns between ‐10% to +15%; returns expected to exceed market returns over a six‐month period due to specific catalysts UNDERPERFORM: Expecting total returns between ‐10% to +15%; returns expected to be below market returns over a six‐month period due to specific catalysts SELL: Expecting negative total returns of 10% or more over the next 12 months
SECTOR RECOMMENDATIONS OVERWEIGHT: The industry, as defined by the analyst's coverage universe, is expected to outperform the relevant primary market index by at least 10% over the next 12 months. NEUTRAL: The industry, as defined by the analyst's coverage universe, is expected to perform in line with the relevant primary market index over the next 12 months. UNDERWEIGHT: The industry, as defined by the analyst's coverage universe, is expected to underperform the relevant primary market index by 10% over the next 12 months.
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 6 of 6
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KT•ZMICO Securities Company Limited
st
8 , 15 -17 , 19 , 21 Floor, Liberty Square Bldg., 287 Silom Road, Bangrak, Bangkok 10500 Telephone: (66-2) 695-5000
Phaholyothin Branch
rd
Fax. (66-2) 631-1709
Ploenchit Branch
th
nd
2
Sindhorn Branch
3 Floor, Shinnawatra Tower II,
8 Floor, Ton Son Tower,
1291/1 Phaholyothin Road,
900 Ploenchit Road, Lumpini,
Floor, Sindhorn Tower 1, 130-132 Wireless Road, Lumpini,
Phayathai, Bangkok 10400
Pathumwan, Bangkok 10330
Pathumwan, Bangkok 10330
Telephone: (66-2) 686-1500
Telephone: (66-2) 626-6000
Telephone: (66-2) 627-3550
Fax. (66-2) 686-1666
Fax. (66-2) 626-6111
Fax. (66-2) 627-3582, 627-3600
Nakhon Pathom Branch 1156 Petchakasem Road, Sanamchan Subdistrict, Amphoe Meuang , Nakhon Pathom Province 73000 Telephone: (034) 271300 Fax: (034) 271300 #100
Chachoengsao Branch
Viphavadee Branch
Phitsanulok Branch
G Floor, Lao Peng Nguan 1 Bldg.,
Krung Thai Bank, Singhawat Branch
333 Soi Cheypuand, Viphavadee-Rangsit Road,
114 Singhawat Road,
Ladyao, Jatujak, Bangkok 10900
Muang, Phitsanulok 65000
Telephone: (66-2) 618-8500
Telephone: 083-490-2873
Fax. (66-2) 618-8569
th
Chonburi Branch
Pattaya Branch
108/34-36 Mahajakkrapad Road,
4 Floor, Forum Plaza Bldg.,
382/6-8 Moo 9, T. NongPrue,
T.Namuang, A.Muang,
870/52 Sukhumvit Road, T. Bangplasoy,
A. Banglamung, Cholburi 20260
Chachoengsao 24000
A. Muang, Cholburi 20000
Telephone: (038) 362-420-9
Telephone: (038) 813-088
Telephone: (038) 287-635
Fax. (038) 362-430
Fax. (038) 813-099
Fax. (038) 287-637
Khon Kaen Branch
5th Floor, Charoen Thani Princess Hotel,
Hat Yai Branch
Sriworajak Building Branch
200/301 Juldis Hatyai Plaza Floor 3,
1st – 2nd Floor, Sriworajak Building, 222
260 Srichan Road, T. Naimuang,
Niphat-Uthit 3 Rd,
Luang Road, Pomprab,
A. Muang, Khon Kaen 40000
Hatyai Songkhla 90110
Bankgok 10100
Telephone: (043) 389-171-193
Telephone: (074) 355-530-3
Telephone: (02) 689-3100
Fax. (043) 389-209
Fax: (074) 355-534
Fax. (02) 689-3199
Central World Branch
Chiang Mai Branch
Phuket Branch
999/9 The Offices at Central World,
422/49 Changklan Road, Changklan
22/61-63, Luang Por Wat Chalong Road,
16th Fl., Rama 1 Rd, Pathumwan,
Subdistrict, Amphoe Meuang,
Talat Yai, Mueang Phuket,
Bangkok 10330
Chiang Mai 50100
Phuket 83000
Telephone: (66-2) 673-5000,
Telephone: (053) 270-072
Tel. (076) 222-811,(076) 222-683
(66-2) 264-5888 Fax. (66-2) 264-5899
Fax: (053) 272-618
Fax. (076) 222-861
Pak Chong Branch
Cyber Branch @ North Nana
173 175, Mittapap Road,
Krung Thai Bank PCL, 2 Floor, North Nana Branch 35 Sukhumvit Rd.,Klong Toey Nua Subdistrict , Wattana District, Bangkok 10110 Telephone: 083-490-2871
Nong Sarai, Pak Chong, Nakhon Ratchasima 30130 Tel. (044) 279-511 Fax. (044) 279-574
Nakhon Ratchasima Branch
Bangkhae Branch
6th Floor The Mall Group Building Bangkhae 275 Moo 1 Petchkasem Road, North Bangkhae, Bangkhae, Bangkok 10160 Tel. (66-2) 454-9979 Fax. (66-2) 454-9970
624/9 Changphuek Road, . Naimaung, A.Maung, Nakhon Ratchasima 30000 Telephone: (044) 247222 Fax: (044) 247171 Information herein was obtained from sources believed to be reliable, but its completeness and accuracy are not guaranteed. All opinions expressed constitute our views on that date and are not intended as an offer or solicitation to sell or buy any securities. Investors should exercise care when making a decision to invest in securities. No one may modify or distribute any part of this report unless written permission is first received from Seamico Securities Plc. If any modifications are made, quotes or references taken from the report and the report date must be clearly mentioned and must not cause misunderstanding or damage to the company.
Overweight
13 March 2015
Rate cut impacts
Share data (Banking) SET index
1,544.34
Sector index
604.79
52‐week high
688.00
52‐week low
488.48
Market capitalization (Bt m)
2,526,150.33
% of market cap
17.45
Avg daily turnover (m shares)
317.23
Beta
1.46
Sector Performance (%)
1M
3M
12M
Absolute
‐3.88
1.23
20.02
Relative
‐0.73
‐0.68
7.02
Note: KT•ZMICO is a partnership between KTB and ZMICO
Prapharas Nonthapiboon Analyst, no 17836 [email protected] 66 (0) 2695‐5872
Rate cut to post slight downside risk to banks’ earnings We are maintaining our Overweight stance for the banking sector given that banks will be the prime gainers on the improving macro fronts. Our top picks remain KBANK, SCB and TMB. However, the rate cut impact and the potential for a weaker‐than‐expected economic growth may post some downside risk to banks’ earnings. The MPC voted 4‐3 to cut the rate by 25bps At the meeting on March 11, the Monetary Policy Committee (MPC) voted four to three to cut the policy rate by 25bps to 1.75%. The decision seemed to be a surprise to the market as only six analysts out of 22 had predicted it. SCB to follow lead of central bank Siam Commercial Bank (SCB) became the first commercial bank to follow the central bank's 25‐basis‐point rate cut. The bank trimmed its minimum lending rate (MLR) and fixed‐deposit rate by 20 basis points, effective on 12 Mar‐15, while keeping savings deposit rates unchanged. Expect banks 15E net profit to be hurt by 2‐3% from the rate cut Assuming a 25 bps policy rate cut and parallel rate cuts (20 bps cut in MLR and fixed deposit rate), we expect large to mid size banks’ net profit for 2015E to be hurt by 2‐3% with BBL and KTB to see a slightly higher impact (see figure 1). This will especially dampen NIM during 2Q‐ 3Q/15 as it takes around one or two quarters for deposits to be re‐ priced. The greater impact to BBL and KTB is due largely to the high influx of deposits since 4Q14 and higher net excess liquidity (~Bt440bn for BBL and Bt350bn for KTB as of Jan‐15) in the money market (figure 2). KBANK should see a lower impact among large banks on its more efficient NIM management. Gainers will be consumer finance and auto hire purchase operators The main gainers from the rate cut will be consumer finance firms (SAWAD, MTLS, KTC), with the potential positive impact to 2015E net profit expected to be around 2‐4%, as well as auto hire purchase operators (TCAP, TISCO, KKP), with an expected net potential positive impact to 2015E net profit of ~2% (figure 1). This should be thanks to their portfolio mixes with fixed rate loans constituting around 60‐90% of the total portfolio vs. around 30% for banks. Potential for weaker‐than expected economy may post some risk to banks’ earnings The rate cut coupled with the likelihood of slower‐than‐expected GDP growth could post some downside risk to the NIM and net profit forecasts for 2015E by around 5%.
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 1 of 6
Figure 1: Potential impact of rate cut Potential impact to 15E net profit (%) 25 bps policy rate cut Net impact of each 20 bps cut in fixed deposit rate and MLR Net impact Net impact (~10M15)* 25 bps policy rate cut (~10M15) (policy rate cut only)**
BBL ‐2.3% ‐1.5% ‐3.8% ‐3.1% ‐1.9%
KTB ‐1.6% ‐1.8% ‐3.4% ‐2.7% ‐1.3%
SCB KBANK ‐0.6% ‐0.2% ‐1.5% ‐1.7% ‐2.1% ‐1.9% ‐1.7% ‐1.5% ‐0.5% ‐0.2%
TMB ‐0.6% ‐2.8% ‐3.4% ‐2.7% ‐0.5%
TCAP ‐0.2% 2.1% 1.9% 1.6% ‐0.1%
TISCO ‐0.1% 2.0% 1.9% 1.5% ‐0.1%
KKP SECTOR 0.4% ‐0.9% 1.2% ‐1.4% 1.5% ‐2.4% 1.2% ‐1.8% 0.3% ‐0.8%
Current 2015E Net profit (Btmn) Net profit growth (%)
38,483 37,550 57,832 49,707 10,785 6% 13% 8% 8% 13%
5,629 10%
4,765 12%
3,899 208,650 48% 9%
Source: KT ZMICO Research * Net potential impacts of rate cut to 15 net profits assuming a 25 bps policy rate cut and parallel rate cuts (20 bps cut in MLR and fixed deposit rate) starting from around mid Mar‐15. ** Net potential impacts of rate cut to 15 net profits assuming only a 25 bps policy rate cut without other lending or deposit rate cut starting from around mid Mar‐15.
Figure 2: Net excess liquidity in the money market/assets (Jan‐15) (%)
18 16 14 12 10 8 6 4 2 0 -2 -4
16.7 12.9
6.7
7.3 4.8
BBL
KTB
SCB
TISCO
4.3
TMB
2.8
KBANK
KKP
TCAP
-2.1
-3.4
Sector
Source: Bank of Thailand, KT ZMICO Research
Figure 3: Net excess liquidity in the money markets (Jan‐15) Net excess liquidity in the money markets (Jan-15) BBL KTB SCB TISCO TMB KBANK KKP TCAP Sector
% to assets 16.7 12.9 6.7 4.8 4.3 2.8 -2.1 -3.4 7.3
Btmn 444,934 350,613 165,901 14,255 32,903 60,649 -4,679 -33,924 1,030,652
Source: Bank of Thailand, KT ZMICO Research
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 2 of 6
Figure 4: Rating and Valuation Summary Rating
Banks
Target Price 15E (Bt)
PER (X) 2014
P/BV (X)
2015E
BBL
Buy
245
KTB
Unrated
29.00
9.8
Buy
270
11.6
Buy Outperform
220 2.90
11.3 14.4
10.5 12.7
KBANK SC B TMB
10.1
2014
ROE (%)
2015E
2014
Div. yield (%)
2015E
2014
2015E 3.65
1.1
1.1
11.7
11.6
3.39
8.7
1.4
1.3
15.1
16.6
3.87
4.15
10.8
2.1
1.8
19.4
17.9
1.74
1.85
2.1 2.0
1.9 1.8
20.1 14.5
18.9 14.7
3.09 1.91
3.37 2.75
9.5
BAY
Underperform
42.00
28.9
23.0
3.1
2.8
11.1
12.8
1.04
1.30
KKP TC AP TISC O
Underperform Underperform Underperform
44.00 36.00 46.00
13.1 9.1 8.8
8.8 8.3 7.8
1.0 0.9 1.4
0.9 0.8 1.3
7.4 10.4 17.4
10.5 10.6 17.5
4.88 4.38 4.73
5.66 4.66 5.25
Sector
Overweight
12.2
11.0
1.8
1.6
15.3
15.2
3.14
3.26
Source: Bloomberg, KT ZMICO Research
Figure 5: Sensitivity of bank market prices based on P/BV at different standard deviation levels (SD) Market Price (Bt.)
12-Mar-15
+2.0SD +1.5SD +1SD +0.5SD Avg.
-0.5SD -1SD -1.5SD -2.0SD 2013-2015
Price P/BV(x)
High
Low
BAY
55.00
2.28
57
52
47
42
37
32
27
22
17
104
28
BBL
183.5
1.02
276
260
244
228
212
196
181
165
149
237
165
KBANK
225.00
1.81
310
288
266
244
222
200
178
156
134
252
146
KKP
38.00
0.84
62
57
51
46
40
35
29
24
18
71
34
KTB
23.00
1.25
33
30
27
24
21
18
15
12
10
28
15
SC B
176.50
1.84
260
245
230
214
199
184
168
153
137
200
131
TC AP
35.25
0.82
57
51
46
41
36
31
26
21
16
50
30
TISC O
46.25
1.29
75
69
63
58
52
46
40
35
29
61
35
3.00
1.69
4.07
3.70
3.34
2.97
2.60
2.24
1.87
1.50
1.14
3.24
1.87
604.8
1.7
762
710
657
604
551
498
446
393
340
688
428
TMB SETBANK
Source: Bloomberg, KT ZMICO Research
Figure 6: Banks’ share price performance & relative performance vs. SETBANK and SET C losed(Bt) SET BANK Banking BAY BBL KBANK KKP KTB SC B TC AP TISC O TMB LHBANK
2013 - 2015
12-Mar-15 High 1,544 1,643 605 688 55.00 183.50 225.00 38.00 23.00 176.50 35.25 46.25 3.00 1.97
104.00 237.00 252.00 71.25 27.75 199.50 50.25 60.75 3.24 2.28
Low 1,225 428 27.50 165.00 145.50 34.25 15.30 130.50 29.75 34.50 1.87 1.15
6 -20 -2 -4 -1 0 -1 -7 -1 -2 1 -2 1 -3 0 -1 -2 -5 -1 -2
26 -5 -5 -5 4 -4 8 8 1 -3
24 -5 -2 -4 0 -4 10 5 2 61
Relative to SETBA NK (%)
Relative to SET (%)
Price change (%) 1W 1M 1Q YTD -1 -4 14 3 0 -5 1 2
1Y 14 22
2Y High 1W 1M 1Q YTD -2 -6 0 -12 1 -1 -13 -1
54 4 31 -8 25 13 1 14 19 61
57 -19 5 -39 -12 -1 -22 -11 12 33
-47 -23 -11 -47 -17 -12 -30 -24 -7 -14
7 -16 13 -1 0 -19 -1 4 -19 0 -2 -19 -1 3 -10 1 3 -18 1 2 -5 1 4 -6 -1 -1 -13 0 2 -17
1Y 8
2Y High 1W 1M 2M 1Q YTD 1Y 2Y High 2
-6
21 40 59 -8 -10 -17 -5 17 7 -7 -22 -37 -3 11 -10 -7 -1 1 7 -12 -20 2 0 -9 -1 5 14 58 48 35
-41 -17 -5 -41 -11 -5 -24 -18 -1 -8
6 -15 -2 1 -2 5 -1 -1 -2 4 1 4 0 3 0 5 -2 0 -1 3
0 -2 0 -4 4 -2 10 2 1 2
25 -6 -6 -6 2 -5 7 7 -1 -5
Source: Bloomberg, KT ZMICO Research
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 3 of 6
22 32 57 -6 -18 -19 -3 9 5 -5 -29 -39 -1 3 -12 -5 -9 -1 9 -20 -22 3 -7 -11 0 -2 12 60 40 33
-35 -10 1 -35 -5 1 -18 -12 5 -2
Figure 7: P/BV of SETBANK P/BV (X)
3.6 3.2
Red‐shirt protest Fire at CTW (May‐10)
2.8 2.4
+2.0SD = 2.33x
2.0
+1.0SD = 1.99x +0.5SD = 1.82x
Up cycle economy
Mean = 1.64x
1.6-0.5SD = 1.47x -1.0SD = 1.30x
Jan-15
Jun-14
Nov-13
Apr-13
Sep-12
Feb-12
Jul-11
May-10
Oct-09
Mar-09
Aug-08
Jan-08
Jun-07
11 Mar 15 = 1.71x Great US recession/Airport Closure
Apr-06
Feb-05
Sep-05
Jul-04
Dec-03
May-03
Mar-02
Jan-01
Aug-01
0.4
Oct-02
Military Coup (19 Sept‐06) Yellow‐shirt protest (07)
Nov-06
0.8
Coup
EU-US Debt crisis Widespread Flood
-2.0SD = 0.95x
Dec-10
1.2
Source: Banks, KT ZMICO Research
Figure 8: SETBANK Index and PER Band (SETBANK Index) 1,000
Up cycle economy 15x
800
13x 600
11x 9x
400
7x
Coup 200
EU‐US Debt crisis Widespread Flood
-
Great US recession
Jan-15
Jan-14
Jan-13
Jan-12
Jan-11
Jan-10
Jan-09
Jan-08
Jan-07
Jan-06
Jan-05
Jan-04
Jan-03
Jan-02
-200
Source: Bloomberg, KT ZMICO Research
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 4 of 6
Figure 9: Valuations vs. regional peers Regional
NP growth(%)
Banks
2014E 2015E 2014E 2015E 2014E 2015E
C hina Hong Kong India Indonesia Korea Malaysia
7 -11 -2 -3 55 -1
PER (X)
5 13 18 16 3 7
P/BV (X)
Dividend yield (%) 2014E
2015E
ROE (%) 2014E 2015E
7.1 11.2 10.4 13.6 9.9 12.4
6.4 10.3 16.3 11.9 8.2 11.6
1.0 1.1 1.5 2.2 0.6 1.6
0.9 1.1 2.1 2.0 0.5 1.4
5.1 4.1 2.5 1.8 2.3 3.3
5.5 4.4 1.9 1.9 2.7 3.8
16.5 12.8 13.8 16.7 6.5 13.7
15.7 10.8 15.1 17.0 6.3 12.9
Philippines
-3
8
15.3
14.5
1.8
1.7
1.5
1.5
13.1
12.5
Singapore Thailand Regional
17 3 6.9
3 11 9.4
13.4 12.2 11.7
12.4 11.0 11.4
1.2 1.8 1.4
1.1 1.6 1.4
3.2 3.1 3.0
3.9 3.3 3.2
10.6 15.3 13.2
11.6 15.2 13.0
Source: Bloomberg, KT ZMICO Research
Figure 10: Valuations vs. regional peers 300 MSCI Asia Ex JP FIN
275 250
Thai Banks Index Indonesian Banks Index Singaporean Banks Index
225 200 175
Malaysian Banks Index Hong Kong Banks Index Korean Banks Index Philippine Banks Index
150 125 100 75
Jan-10 Mar-10 May-10 Jul-10 Sep-10 Nov-10 Jan-11 Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 May-13 Jul-13 Sep-13 Nov-13 Jan-14 Mar-14 May-14 Jul-14 Sep-14 Nov-14 Jan-15 Mar-15
50
Source: Bloomberg, KT ZMICO Research
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 5 of 6
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 BUY: Expecting positive total returns of 15% or more over the next 12 months OUTPERFORM: Expecting total returns between ‐10% to +15%; returns expected to exceed market returns over a six‐month period due to specific catalysts UNDERPERFORM: Expecting total returns between ‐10% to +15%; returns expected to be below market returns over a six‐month period due to specific catalysts SELL: Expecting negative total returns of 10% or more over the next 12 months
SECTOR RECOMMENDATIONS OVERWEIGHT: The industry, as defined by the analyst's coverage universe, is expected to outperform the relevant primary market index by at least 10% over the next 12 months. NEUTRAL: The industry, as defined by the analyst's coverage universe, is expected to perform in line with the relevant primary market index over the next 12 months. UNDERWEIGHT: The industry, as defined by the analyst's coverage universe, is expected to underperform the relevant primary market index by 10% over the next 12 months.
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 6 of 6
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KT•ZMICO Securities Company Limited
st
8 , 15 -17 , 19 , 21 Floor, Liberty Square Bldg., 287 Silom Road, Bangrak, Bangkok 10500 Telephone: (66-2) 695-5000
Phaholyothin Branch
rd
Fax. (66-2) 631-1709
Ploenchit Branch
th
nd
2
Sindhorn Branch
3 Floor, Shinnawatra Tower II,
8 Floor, Ton Son Tower,
1291/1 Phaholyothin Road,
900 Ploenchit Road, Lumpini,
Floor, Sindhorn Tower 1, 130-132 Wireless Road, Lumpini,
Phayathai, Bangkok 10400
Pathumwan, Bangkok 10330
Pathumwan, Bangkok 10330
Telephone: (66-2) 686-1500
Telephone: (66-2) 626-6000
Telephone: (66-2) 627-3550
Fax. (66-2) 686-1666
Fax. (66-2) 626-6111
Fax. (66-2) 627-3582, 627-3600
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Chachoengsao Branch
Viphavadee Branch
Phitsanulok Branch
G Floor, Lao Peng Nguan 1 Bldg.,
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333 Soi Cheypuand, Viphavadee-Rangsit Road,
114 Singhawat Road,
Ladyao, Jatujak, Bangkok 10900
Muang, Phitsanulok 65000
Telephone: (66-2) 618-8500
Telephone: 083-490-2873
Fax. (66-2) 618-8569
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Chonburi Branch
Pattaya Branch
108/34-36 Mahajakkrapad Road,
4 Floor, Forum Plaza Bldg.,
382/6-8 Moo 9, T. NongPrue,
T.Namuang, A.Muang,
870/52 Sukhumvit Road, T. Bangplasoy,
A. Banglamung, Cholburi 20260
Chachoengsao 24000
A. Muang, Cholburi 20000
Telephone: (038) 362-420-9
Telephone: (038) 813-088
Telephone: (038) 287-635
Fax. (038) 362-430
Fax. (038) 813-099
Fax. (038) 287-637
Khon Kaen Branch
5th Floor, Charoen Thani Princess Hotel,
Hat Yai Branch
Sriworajak Building Branch
200/301 Juldis Hatyai Plaza Floor 3,
1st – 2nd Floor, Sriworajak Building, 222
260 Srichan Road, T. Naimuang,
Niphat-Uthit 3 Rd,
Luang Road, Pomprab,
A. Muang, Khon Kaen 40000
Hatyai Songkhla 90110
Bankgok 10100
Telephone: (043) 389-171-193
Telephone: (074) 355-530-3
Telephone: (02) 689-3100
Fax. (043) 389-209
Fax: (074) 355-534
Fax. (02) 689-3199
Central World Branch
Chiang Mai Branch
Phuket Branch
999/9 The Offices at Central World,
422/49 Changklan Road, Changklan
22/61-63, Luang Por Wat Chalong Road,
16th Fl., Rama 1 Rd, Pathumwan,
Subdistrict, Amphoe Meuang,
Talat Yai, Mueang Phuket,
Bangkok 10330
Chiang Mai 50100
Phuket 83000
Telephone: (66-2) 673-5000,
Telephone: (053) 270-072
Tel. (076) 222-811,(076) 222-683
(66-2) 264-5888 Fax. (66-2) 264-5899
Fax: (053) 272-618
Fax. (076) 222-861
Pak Chong Branch
Cyber Branch @ North Nana
173 175, Mittapap Road,
Krung Thai Bank PCL, 2 Floor, North Nana Branch 35 Sukhumvit Rd.,Klong Toey Nua Subdistrict , Wattana District, Bangkok 10110 Telephone: 083-490-2871
Nong Sarai, Pak Chong, Nakhon Ratchasima 30130 Tel. (044) 279-511 Fax. (044) 279-574
Nakhon Ratchasima Branch
Bangkhae Branch
6th Floor The Mall Group Building Bangkhae 275 Moo 1 Petchkasem Road, North Bangkhae, Bangkhae, Bangkok 10160 Tel. (66-2) 454-9979 Fax. (66-2) 454-9970
624/9 Changphuek Road, . Naimaung, A.Maung, Nakhon Ratchasima 30000 Telephone: (044) 247222 Fax: (044) 247171 Information herein was obtained from sources believed to be reliable, but its completeness and accuracy are not guaranteed. All opinions expressed constitute our views on that date and are not intended as an offer or solicitation to sell or buy any securities. Investors should exercise care when making a decision to invest in securities. No one may modify or distribute any part of this report unless written permission is first received from Seamico Securities Plc. If any modifications are made, quotes or references taken from the report and the report date must be clearly mentioned and must not cause misunderstanding or damage to the company.
