Bangkok Bank - Global Alliance Partners
Bangkok Bank Outperform (17E TP Bt182.00)
Company Update
Close Bt182.00
Banking
Earnings upgrade/Earnings downgrade/Overview unchanged
August 4, 2017
Remaining resilient; attractive valuation Price Performance (%)
Source: SET Smart
FY17
FY18
Consensus EPS (Bt)
17.896
19.841
KT ZMICO vs. consensus Share data
‐3.8%
‐3.1%
Reuters / Bloomberg
BBL.BK/BBL TB
Paid‐up Shares (m)
1,908.84
Par (Bt)
10.00
Market cap (Bt bn / US$ m)
347.00/10,446.00
Foreign limit / actual (%)
25.00/29.46
52 week High / Low (Bt)
190.00/151.00
Avg. daily T/O (shares 000)
3,892.00
NVDR (%)
33.93
Estimated free float (%)
97.8
Beta
0.85
URL
www.bangkokbank.com
CGR
Anti‐corruption
Level 4 (Certified)
Prapharas Nonthapiboon Analyst, no 17836 [email protected] 66 (0) 2695‐5872
Undemanding valuation and solid balance sheet its main price appeals We maintain our Outperform rating for BBL. We still see BBL being well positioned and prepared to handle any challenges while it should also gain from the gradual economic recovery. Moreover, its attractive valuation (with 2017E P/BV of just 0.89x vs. the sector average of ~1.1x) remains its main price appeal. 2017 targets maintained; upside on fees with downside on provision BBL kept all of its financial targets unchanged. However, we see that the main bright spot could be the bank’s strong fee income growth (+8% YoY in 1H17), which should surpass our original forecast of +2% and the bank’s growth target of up to 5% for 2017. In contrast, we see that credit cost should surpass the bank’s guidance of a stable level from 2016 (~Bt16bn) vs. Bt12bn in 1H17. Loans (+4% YoY and +2% YTD in 1H17) are likely to see modest growth in line with its target of 4‐6%, driven mainly by corporate loans linked to infrastructure projects. Asset quality issue still needs to be kept in check The bank’s NPLs for 2Q17 still increased QoQ by Bt8.2bn to 3.7% of loans from 3.5% in 1Q17 and 3.2% in 4Q16. The increase in NPLs QoQ came largely from re‐entry NPLs in mid‐to‐small SMEs and some corporate clients, mainly in the export‐related sector. However, the bank still expects its NPL situation to be manageable given its solid balance sheet as well as its more aggressive moves in the debt restructuring process despite seemingly being slower than several peers, i.e., KBANK, SCB and TMB, which have employed a more aggressive bad‐debt write‐off strategy to curb NPLs. Moreover, BBL expects its NPL ratio to peak, likely by 4Q17 or 1Q18, and also anticipates that the pace of further increases will be slower vs. 1H17 as it normally sees higher NPL resolution and loan write‐offs in 4Q. Trimmed 2017‐18E earnings estimates by 5% We trimmed our earnings estimates in line with the bank’s latest guidance and operating environment (especially in regard to the potential for a higher‐than‐expected provision and better‐than‐expected fee income). We lowered our net profit (NP) estimates for 2017‐18E by 5%. The main revisions are 1) a higher provision given weakened asset quality; and 2) slightly lower NIM to reflect the rate cut impact. At the same time, we also raised our net fee income growth forecasts to reflect its better‐than‐expected performance as mentioned earlier, given a slower impact from the PromptPay program. In addition, we raised our forecasts for gain on investments to reflect its solid gain of Bt2.96bn in 1H17. Following our NP revision, we trimmed our 17E target price to Bt182/share from Bt185/share for implied target P/BV of 0.9x. Financials and Valuation FY Ended 31 Dec 2015 PPOP (Btmn) 35,680 Net Profit (Btmn) 34,181 EPS (Bt) 17.91 EPS Growth (%) ‐6% Book value (Bt) 189.56 Dividend (Bt) 6.50 FY Ended 31 Dec 2015 PER (X) 10.16 PBV (X) 0.96 Div. Yield (%) 3.57 ROE (%) 10%
2016 37,888 31,815 16.67 ‐7% 198.56 6.50 2016 10.92 0.92 3.57 9%
2017E 41,727 32,874 17.22 3% 203.64 6.50 2017E 10.57 0.89 3.57 9%
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 1 of 5
2018E 43,746 36,682 19.22 12% 216.94 6.73 2018E 9.47 0.84 3.70 9%
2019E 47,575 41,360 21.67 13% 232.49 7.00 2019E 8.40 0.78 3.85 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%
2016 Actual 3.9% 1.8%
1H17 Actual 3.7% 8.4%
2.16%
2.32%
2.33%
2017E 2017E Bank's targets KTZ's forecasts 4‐6% 4.0% Up to 5% 5.0% Maintain
2.31%
Cost to Income
43.8%
47.7%
43.3%
45% (+/‐)
45.3%
NPL/loans
2.80%
3.22%
3.70%
Not disclosed
3.89%
Provision (Btbn)
14.7
15.7
11.5
Near 2016 level
20.2
Provision (% of loans)
0.78
0.81
1.16
Not disclosed
1.00
Source: KT ZMICO Research
Figure 2: Key changes in our earnings revision Key assumption changes
2017E New 32,874 ‐5% 3% 20,187 1.00% 5% 2.31% 45.3% 5,462
Net profit (Btmn) % Change in net profit from previous forecast % 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 Gain on investments
2018E Previous 34,619
16,916 0.83% 2% 2.34% 45.9% 3,500
New 36,682 ‐5% 12% 18,525 0.87% 7% 2.31% 45.2% 4,800
Previous 38,814
17,010 0.78% 5% 2.36% 45.1% 3,500
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
price (Bt)
to current price (%)
+1.5SD
1.50
305
67
+1 S.D.
+1.0SD
1.39
282
55
+0.5SD
1.27
259
43
Average
1.16
237
30
-1.5 S.D.
-0.5SD
1.05
214
18
-2 S.D.
-1.0SD
0.94
191
5
-2.5S.D.
-1.5SD
0.83
169
-7
-2.0SD
0.72
146
-20
-2.5SD
0.61
123
-32
+2 S.D.
1.4
+0.5 S.D. Avg.
1.2
-0.5 S.D.
Jan-17
Jan-16
Jan-15
Jan-14
Jan-13
Jan-12
Jan-11
Jan-10
Jan-09
Jan-08
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) 14.0 13.0
2017E
PER (x) Implied market
+2 S.D. +1.5 S.D.
12.0 11.0
Upside/ Downside
price (Bt)
to current price (%)
+1 S.D.
+2.0SD
13.0
224
23
+0.5 S.D.
+1.5SD
12.3
213
17
11.7
202
11
Avg.
10.0
-0.5 S.D.
+1.0SD
9.0
-1 S.D. -1.5 S.D.
+0.5SD
11.1
190
5
Average
10.4
179
-1
-0.5SD
9.8
168
-8
-1.0SD
9.1
157
-14
-1.5SD
8.5
146
-20
-2.0SD
7.8
135
-26
-2.5SD
7.1
123
-32
-2 S.D.
8.0 7.0 6.0
Source: Bloomberg, KT ZMICO Research
Jan-17
Jan-16
Jan-15
Jan-14
Jan-13
Jan-12
Jan-11
Jan-10
Jan-09
Jan-08
Jan-07
Jan-06
5.0
Jan-05
Jan-07
Jan-05
0.6
-1 S.D.
Jan-06
0.8
Upside/ Downside
+1.5 S.D.
1.6
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 103,814 102,443 106,142 112,162 125,104
Total Interest Expenses
46,304
38,445
37,768
40,555
Net Interest Income
57,510
63,998
68,375
71,607
48,266 76,838
Net Fee and Service income
24,071
24,492
25,717
27,594
29,802
Gain on trading and FX transactions
7,774
7,459
6,415
6,736
7,207
Other Income Total Non‐Interest Income
13,374
9,908
11,614
11,760
12,257
45,218
41,860
43,745
46,090
49,265
Operating Income
102,728
105,858
112,120
117,697
126,103
Personnel Expenses
24,227
25,247
26,257
27,307
28,400
Premises and Equipment Expenses
9,458
9,909
10,602
11,207
11,767
Other Expenses Total Operating Expenses
11,360
15,349
13,889
14,719
16,008
45,045
50,505
50,748
53,233
56,175
Operating Profit
44,310
45,444
49,758
52,704
57,672
Extraordinary Items
‐
‐
‐
‐
‐
Provision for Loan Losses
14,654
15,728
20,187
18,525
18,152
Taxation
8,630
7,556
8,031
8,958
10,096
Minority Interests Net Profit
(220) (254) (279) (299) (320) 34,181
31,815
32,874
36,682
41,360
EPS (Bt) Pre Provisioning Operating Profit (PPOP) Pre Provisioning Profit (PPP)
17.91 35,680 48,834
16.67 37,888 47,543
17.22 41,727 53,061
19.22 43,746 55,207
21.67 47,575 59,512
2015
2016
Statement of Financial Position (Btmn) Year‐end 31 Dec
2017E
2018E
2019E
Assets Cash
61,432
66,338
59,704
60,302
61,508
Interbank & Money Market
372,007
394,612
512,996
502,736
477,599
REPO
‐
‐
‐
‐
‐
Net Investment in Securities
520,805
547,941
509,705
535,149
588,554
Loans
1,868,903
1,941,093
2,018,695
2,119,541
2,268,990
Accrued Interest Receivables
4,279
4,653
4,845
5,087
5,446
Loans & Accrued Int.Rec.
1,873,182
1,945,746
2,023,540
2,124,627
2,274,435
Less: Loan Loss Reserves
(104,187) (119,518) (135,315) (145,454) (155,924)
Net Loans and Receivables
1,768,995
1,826,227
1,888,225
1,979,174
Properties Foreclosed
13,579
12,262
12,017
11,777
11,188
Premises and Equipment, Net
46,108
45,231
46,587
47,985
48,945
2,118,512
Other Assets
52,926
51,617
54,426
58,604
62,511
Total Assets
2,835,852
2,944,230
3,083,661
3,195,727
3,368,816
2,090,965
2,178,141
2,326,254
2,412,326
2,554,653
Liabilities & Equity Total Deposits Interbank & Money Market
128,681
130,928
117,835
121,370
125,011
Total Borrowings
138,403
137,815
137,126
136,441
135,758
Other Liabilities
115,772
118,101
113,482
111,201
109,305
Total Liabilities
2,473,821
2,564,985
2,694,698
2,781,337
2,924,727
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
138,432
156,706
179,228
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
361,832
379,016
388,711
414,112
443,783
Total Shareholders' Equity Source: KTZMICO Research
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
17.22
19.22
21.67
Per share Data (Bt) EPS DPS BVPS Multiplier (X) PER
6.50
6.50
6.50
6.73
7.00
189.56
198.56
203.64
216.94
232.49
10.16
10.92
10.57
9.47
8.40
P/BV
0.96
0.92
0.89
0.84
0.78
Dividend yield (%)
3.57
3.57
3.57
3.70
3.85
Net Profit
‐5.9%
‐6.9%
3.3%
11.6%
12.8%
EPS
‐5.9%
‐6.9%
3.3%
11.6%
12.8%
Net Interest Income
‐2.5%
11.3%
6.8%
4.7%
7.3%
Non Interest Income
27.8%
‐7.4%
4.5%
5.4%
6.9%
Net Fee & Service Income Operating Income
10.8%
1.8%
5.0%
7.3%
8.0%
8.8%
3.0%
5.9%
5.0%
7.1%
Growth (%)
4.5%
12.1%
0.5%
4.9%
5.5%
Pre Provisioning Operating Profit (PPOP) Pre Provisioning Profit (PPP) Loans Deposits
Operating Expenses
3.1% 34.4% 4.9% 1.6%
6.2% ‐2.6% 3.9% 4.2%
10.1% 11.6% 4.0% 6.8%
4.8% 4.0% 5.0% 3.7%
8.8% 7.8% 7.1% 5.9%
Gross NPLs
24.8%
22.4%
31.3%
‐3.0%
‐7.3%
56,226
68,841
90,420
87,674
81,291
2.8%
3.2%
3.9%
3.6%
3.2%
Loan Loss Reserve/NPLs
185.3%
173.6%
149.7%
165.9%
191.8%
Financial ratios Gross NPLs (Btmn) Gross NPL/Loans Accrued Interest/Loans
0.2%
0.2%
0.2%
0.2%
0.2%
Loan Loss Reserve/Loans
5.6%
6.2%
6.7%
6.9%
6.9%
Property Foreclosed/Loans
0.7%
0.6%
0.6%
0.6%
0.5%
Equity/Asset
12.8%
12.9%
12.6%
13.0%
13.2%
Tier I to Risk Assets
15.8%
16.4%
16.6%
17.0%
17.3%
Capital Adequacy Ratio (CAR)
17.9%
18.3%
18.4%
18.8%
19.0%
Loan to Deposit Ratio (LDR)
89.4%
89.1%
86.8%
87.9%
88.8%
Loan to Deposit and Borrowings
83.8%
83.8%
81.9%
83.2%
84.3%
Capital & Liquidity Ratio
Profitability Ratio ROA
1.2%
1.1%
1.1%
1.2%
1.3%
ROE
10.0%
8.6%
8.6%
9.1%
9.6% 44.5%
Cost to Income
43.8%
47.7%
45.3%
45.2%
Non Interest Income/Total Income
44.0%
39.5%
39.0%
39.2%
39.1%
Net Interest Margin (NIM)
2.16%
2.32%
2.31%
2.31%
2.37%
Key Assumptions
2015
2016
2017E
2018E
2019E
Loan Growth ‐ Net
4.9%
3.9%
4.0%
5.0%
7.1%
10.8%
1.8%
5.0%
7.3%
8.0%
Net Fee Income Growth Cost to Income
43.8%
47.7%
45.3%
45.2%
44.5%
Net Interest Margin
2.16%
2.32%
2.31%
2.31%
2.37%
Provision expenses (Btmn) Provision (% of loans) Source: KTZMICO Research
14,654 15,728 20,187 18,525 18,152 0.78% 0.81% 1.00% 0.87% 0.80%
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, POMPUI, TTL, NMG, SAWAD, CRANE.
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 returns over a six‐month period due to specific UNDERWEIGHT: The industry, as defined by the analyst's coverage universe, is expected to underperform the relevant catalysts SELL: Expecting negative total returns of 10% or more primary market index by 10% over the next 12 months. 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 Bt182.00
Banking
Earnings upgrade/Earnings downgrade/Overview unchanged
August 4, 2017
Remaining resilient; attractive valuation Price Performance (%)
Source: SET Smart
FY17
FY18
Consensus EPS (Bt)
17.896
19.841
KT ZMICO vs. consensus Share data
‐3.8%
‐3.1%
Reuters / Bloomberg
BBL.BK/BBL TB
Paid‐up Shares (m)
1,908.84
Par (Bt)
10.00
Market cap (Bt bn / US$ m)
347.00/10,446.00
Foreign limit / actual (%)
25.00/29.46
52 week High / Low (Bt)
190.00/151.00
Avg. daily T/O (shares 000)
3,892.00
NVDR (%)
33.93
Estimated free float (%)
97.8
Beta
0.85
URL
www.bangkokbank.com
CGR
Anti‐corruption
Level 4 (Certified)
Prapharas Nonthapiboon Analyst, no 17836 [email protected] 66 (0) 2695‐5872
Undemanding valuation and solid balance sheet its main price appeals We maintain our Outperform rating for BBL. We still see BBL being well positioned and prepared to handle any challenges while it should also gain from the gradual economic recovery. Moreover, its attractive valuation (with 2017E P/BV of just 0.89x vs. the sector average of ~1.1x) remains its main price appeal. 2017 targets maintained; upside on fees with downside on provision BBL kept all of its financial targets unchanged. However, we see that the main bright spot could be the bank’s strong fee income growth (+8% YoY in 1H17), which should surpass our original forecast of +2% and the bank’s growth target of up to 5% for 2017. In contrast, we see that credit cost should surpass the bank’s guidance of a stable level from 2016 (~Bt16bn) vs. Bt12bn in 1H17. Loans (+4% YoY and +2% YTD in 1H17) are likely to see modest growth in line with its target of 4‐6%, driven mainly by corporate loans linked to infrastructure projects. Asset quality issue still needs to be kept in check The bank’s NPLs for 2Q17 still increased QoQ by Bt8.2bn to 3.7% of loans from 3.5% in 1Q17 and 3.2% in 4Q16. The increase in NPLs QoQ came largely from re‐entry NPLs in mid‐to‐small SMEs and some corporate clients, mainly in the export‐related sector. However, the bank still expects its NPL situation to be manageable given its solid balance sheet as well as its more aggressive moves in the debt restructuring process despite seemingly being slower than several peers, i.e., KBANK, SCB and TMB, which have employed a more aggressive bad‐debt write‐off strategy to curb NPLs. Moreover, BBL expects its NPL ratio to peak, likely by 4Q17 or 1Q18, and also anticipates that the pace of further increases will be slower vs. 1H17 as it normally sees higher NPL resolution and loan write‐offs in 4Q. Trimmed 2017‐18E earnings estimates by 5% We trimmed our earnings estimates in line with the bank’s latest guidance and operating environment (especially in regard to the potential for a higher‐than‐expected provision and better‐than‐expected fee income). We lowered our net profit (NP) estimates for 2017‐18E by 5%. The main revisions are 1) a higher provision given weakened asset quality; and 2) slightly lower NIM to reflect the rate cut impact. At the same time, we also raised our net fee income growth forecasts to reflect its better‐than‐expected performance as mentioned earlier, given a slower impact from the PromptPay program. In addition, we raised our forecasts for gain on investments to reflect its solid gain of Bt2.96bn in 1H17. Following our NP revision, we trimmed our 17E target price to Bt182/share from Bt185/share for implied target P/BV of 0.9x. Financials and Valuation FY Ended 31 Dec 2015 PPOP (Btmn) 35,680 Net Profit (Btmn) 34,181 EPS (Bt) 17.91 EPS Growth (%) ‐6% Book value (Bt) 189.56 Dividend (Bt) 6.50 FY Ended 31 Dec 2015 PER (X) 10.16 PBV (X) 0.96 Div. Yield (%) 3.57 ROE (%) 10%
2016 37,888 31,815 16.67 ‐7% 198.56 6.50 2016 10.92 0.92 3.57 9%
2017E 41,727 32,874 17.22 3% 203.64 6.50 2017E 10.57 0.89 3.57 9%
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 1 of 5
2018E 43,746 36,682 19.22 12% 216.94 6.73 2018E 9.47 0.84 3.70 9%
2019E 47,575 41,360 21.67 13% 232.49 7.00 2019E 8.40 0.78 3.85 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%
2016 Actual 3.9% 1.8%
1H17 Actual 3.7% 8.4%
2.16%
2.32%
2.33%
2017E 2017E Bank's targets KTZ's forecasts 4‐6% 4.0% Up to 5% 5.0% Maintain
2.31%
Cost to Income
43.8%
47.7%
43.3%
45% (+/‐)
45.3%
NPL/loans
2.80%
3.22%
3.70%
Not disclosed
3.89%
Provision (Btbn)
14.7
15.7
11.5
Near 2016 level
20.2
Provision (% of loans)
0.78
0.81
1.16
Not disclosed
1.00
Source: KT ZMICO Research
Figure 2: Key changes in our earnings revision Key assumption changes
2017E New 32,874 ‐5% 3% 20,187 1.00% 5% 2.31% 45.3% 5,462
Net profit (Btmn) % Change in net profit from previous forecast % 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 Gain on investments
2018E Previous 34,619
16,916 0.83% 2% 2.34% 45.9% 3,500
New 36,682 ‐5% 12% 18,525 0.87% 7% 2.31% 45.2% 4,800
Previous 38,814
17,010 0.78% 5% 2.36% 45.1% 3,500
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
price (Bt)
to current price (%)
+1.5SD
1.50
305
67
+1 S.D.
+1.0SD
1.39
282
55
+0.5SD
1.27
259
43
Average
1.16
237
30
-1.5 S.D.
-0.5SD
1.05
214
18
-2 S.D.
-1.0SD
0.94
191
5
-2.5S.D.
-1.5SD
0.83
169
-7
-2.0SD
0.72
146
-20
-2.5SD
0.61
123
-32
+2 S.D.
1.4
+0.5 S.D. Avg.
1.2
-0.5 S.D.
Jan-17
Jan-16
Jan-15
Jan-14
Jan-13
Jan-12
Jan-11
Jan-10
Jan-09
Jan-08
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) 14.0 13.0
2017E
PER (x) Implied market
+2 S.D. +1.5 S.D.
12.0 11.0
Upside/ Downside
price (Bt)
to current price (%)
+1 S.D.
+2.0SD
13.0
224
23
+0.5 S.D.
+1.5SD
12.3
213
17
11.7
202
11
Avg.
10.0
-0.5 S.D.
+1.0SD
9.0
-1 S.D. -1.5 S.D.
+0.5SD
11.1
190
5
Average
10.4
179
-1
-0.5SD
9.8
168
-8
-1.0SD
9.1
157
-14
-1.5SD
8.5
146
-20
-2.0SD
7.8
135
-26
-2.5SD
7.1
123
-32
-2 S.D.
8.0 7.0 6.0
Source: Bloomberg, KT ZMICO Research
Jan-17
Jan-16
Jan-15
Jan-14
Jan-13
Jan-12
Jan-11
Jan-10
Jan-09
Jan-08
Jan-07
Jan-06
5.0
Jan-05
Jan-07
Jan-05
0.6
-1 S.D.
Jan-06
0.8
Upside/ Downside
+1.5 S.D.
1.6
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 103,814 102,443 106,142 112,162 125,104
Total Interest Expenses
46,304
38,445
37,768
40,555
Net Interest Income
57,510
63,998
68,375
71,607
48,266 76,838
Net Fee and Service income
24,071
24,492
25,717
27,594
29,802
Gain on trading and FX transactions
7,774
7,459
6,415
6,736
7,207
Other Income Total Non‐Interest Income
13,374
9,908
11,614
11,760
12,257
45,218
41,860
43,745
46,090
49,265
Operating Income
102,728
105,858
112,120
117,697
126,103
Personnel Expenses
24,227
25,247
26,257
27,307
28,400
Premises and Equipment Expenses
9,458
9,909
10,602
11,207
11,767
Other Expenses Total Operating Expenses
11,360
15,349
13,889
14,719
16,008
45,045
50,505
50,748
53,233
56,175
Operating Profit
44,310
45,444
49,758
52,704
57,672
Extraordinary Items
‐
‐
‐
‐
‐
Provision for Loan Losses
14,654
15,728
20,187
18,525
18,152
Taxation
8,630
7,556
8,031
8,958
10,096
Minority Interests Net Profit
(220) (254) (279) (299) (320) 34,181
31,815
32,874
36,682
41,360
EPS (Bt) Pre Provisioning Operating Profit (PPOP) Pre Provisioning Profit (PPP)
17.91 35,680 48,834
16.67 37,888 47,543
17.22 41,727 53,061
19.22 43,746 55,207
21.67 47,575 59,512
2015
2016
Statement of Financial Position (Btmn) Year‐end 31 Dec
2017E
2018E
2019E
Assets Cash
61,432
66,338
59,704
60,302
61,508
Interbank & Money Market
372,007
394,612
512,996
502,736
477,599
REPO
‐
‐
‐
‐
‐
Net Investment in Securities
520,805
547,941
509,705
535,149
588,554
Loans
1,868,903
1,941,093
2,018,695
2,119,541
2,268,990
Accrued Interest Receivables
4,279
4,653
4,845
5,087
5,446
Loans & Accrued Int.Rec.
1,873,182
1,945,746
2,023,540
2,124,627
2,274,435
Less: Loan Loss Reserves
(104,187) (119,518) (135,315) (145,454) (155,924)
Net Loans and Receivables
1,768,995
1,826,227
1,888,225
1,979,174
Properties Foreclosed
13,579
12,262
12,017
11,777
11,188
Premises and Equipment, Net
46,108
45,231
46,587
47,985
48,945
2,118,512
Other Assets
52,926
51,617
54,426
58,604
62,511
Total Assets
2,835,852
2,944,230
3,083,661
3,195,727
3,368,816
2,090,965
2,178,141
2,326,254
2,412,326
2,554,653
Liabilities & Equity Total Deposits Interbank & Money Market
128,681
130,928
117,835
121,370
125,011
Total Borrowings
138,403
137,815
137,126
136,441
135,758
Other Liabilities
115,772
118,101
113,482
111,201
109,305
Total Liabilities
2,473,821
2,564,985
2,694,698
2,781,337
2,924,727
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
138,432
156,706
179,228
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
361,832
379,016
388,711
414,112
443,783
Total Shareholders' Equity Source: KTZMICO Research
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
17.22
19.22
21.67
Per share Data (Bt) EPS DPS BVPS Multiplier (X) PER
6.50
6.50
6.50
6.73
7.00
189.56
198.56
203.64
216.94
232.49
10.16
10.92
10.57
9.47
8.40
P/BV
0.96
0.92
0.89
0.84
0.78
Dividend yield (%)
3.57
3.57
3.57
3.70
3.85
Net Profit
‐5.9%
‐6.9%
3.3%
11.6%
12.8%
EPS
‐5.9%
‐6.9%
3.3%
11.6%
12.8%
Net Interest Income
‐2.5%
11.3%
6.8%
4.7%
7.3%
Non Interest Income
27.8%
‐7.4%
4.5%
5.4%
6.9%
Net Fee & Service Income Operating Income
10.8%
1.8%
5.0%
7.3%
8.0%
8.8%
3.0%
5.9%
5.0%
7.1%
Growth (%)
4.5%
12.1%
0.5%
4.9%
5.5%
Pre Provisioning Operating Profit (PPOP) Pre Provisioning Profit (PPP) Loans Deposits
Operating Expenses
3.1% 34.4% 4.9% 1.6%
6.2% ‐2.6% 3.9% 4.2%
10.1% 11.6% 4.0% 6.8%
4.8% 4.0% 5.0% 3.7%
8.8% 7.8% 7.1% 5.9%
Gross NPLs
24.8%
22.4%
31.3%
‐3.0%
‐7.3%
56,226
68,841
90,420
87,674
81,291
2.8%
3.2%
3.9%
3.6%
3.2%
Loan Loss Reserve/NPLs
185.3%
173.6%
149.7%
165.9%
191.8%
Financial ratios Gross NPLs (Btmn) Gross NPL/Loans Accrued Interest/Loans
0.2%
0.2%
0.2%
0.2%
0.2%
Loan Loss Reserve/Loans
5.6%
6.2%
6.7%
6.9%
6.9%
Property Foreclosed/Loans
0.7%
0.6%
0.6%
0.6%
0.5%
Equity/Asset
12.8%
12.9%
12.6%
13.0%
13.2%
Tier I to Risk Assets
15.8%
16.4%
16.6%
17.0%
17.3%
Capital Adequacy Ratio (CAR)
17.9%
18.3%
18.4%
18.8%
19.0%
Loan to Deposit Ratio (LDR)
89.4%
89.1%
86.8%
87.9%
88.8%
Loan to Deposit and Borrowings
83.8%
83.8%
81.9%
83.2%
84.3%
Capital & Liquidity Ratio
Profitability Ratio ROA
1.2%
1.1%
1.1%
1.2%
1.3%
ROE
10.0%
8.6%
8.6%
9.1%
9.6% 44.5%
Cost to Income
43.8%
47.7%
45.3%
45.2%
Non Interest Income/Total Income
44.0%
39.5%
39.0%
39.2%
39.1%
Net Interest Margin (NIM)
2.16%
2.32%
2.31%
2.31%
2.37%
Key Assumptions
2015
2016
2017E
2018E
2019E
Loan Growth ‐ Net
4.9%
3.9%
4.0%
5.0%
7.1%
10.8%
1.8%
5.0%
7.3%
8.0%
Net Fee Income Growth Cost to Income
43.8%
47.7%
45.3%
45.2%
44.5%
Net Interest Margin
2.16%
2.32%
2.31%
2.31%
2.37%
Provision expenses (Btmn) Provision (% of loans) Source: KTZMICO Research
14,654 15,728 20,187 18,525 18,152 0.78% 0.81% 1.00% 0.87% 0.80%
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, POMPUI, TTL, NMG, SAWAD, CRANE.
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 returns over a six‐month period due to specific UNDERWEIGHT: The industry, as defined by the analyst's coverage universe, is expected to underperform the relevant catalysts SELL: Expecting negative total returns of 10% or more primary market index by 10% over the next 12 months. 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
