|
Bangkok Bank (SET:BBL) is one of the largest regional banks in Southeast Asia with total assets of 2.94 trillion baht at the end of the first-quarter 2016. The Thailand-based bank serves retail customers, small and medium size enterprises (SME), and corporate clients. It has 17 million business and retail customer accounts, approximately 240 business centers and business desks, and a nationwide network of over 1,200 branches. Bangkok Bank also operates overseas branches in China, Hong Kong, the United States, the United Kingdom, Singapore, Indonesia, Laos, Vietnam, the Philippines and other countries.
The company said on April 19, 2016, that its first-quarter 2016 revenues were 26.71 billion baht, beating the 25.35 billion baht consensus estimate of 6 analysts, according to the Financial Times. The company posted first-quarter 2016 earnings of 4.36 baht per share, missing the 4.50 baht per share consensus estimate of 8 analysts. The bank said its first-quarter net profit dropped 12% from a year earlier, mainly due to higher provisions following a rise in bad debts. The provision for credit losses is an estimated amount to be lost and is treated as an expense on the company's financial statements.
Non-performing loans (NPLs) jumped 30% from a year earlier to 62 billion baht, the highest level since 2007, pushing the bank's bad debt ratio up to 2.9% of total lending at the end of March, up from 2.8% at end December, according to Reuters. Bangkok Bank aims for loan growth of 3 to 5% this year but saw loan growth of only 0.3% in the quarter, while its provisions increased by 22%.
For 2015, Bangkok Bank reported a dividend of 6.50 baht per share, unchanged from 2014. The 23 analysts covering the company expect dividends of 6.73 baht per share for the upcoming fiscal year, representing a year-over-year increase of 3.57%. The next earnings announcement is expected on July 20, 2016.
Bangkok Bank announced on April 21 that it cut their minimum retail rate (MRR) by 25 basis points to 7.625%, effective April 25, 2016, in response to the Thailand government policy focused on stimulating the country’s economy. The move came after the minimum lending rate (MLR) cut of 15 basis points, to 6.375% by Siam Commercial Bank (SET:SCB) at the beginning of April.
SCB also said an additional 10 basis points will follow, as other banks cut their minimum lending rate by 25 basis points. Other big Thai banks, including Krung Thai Bank (SET:KTB) and Kasikornbank (SET:KBANK), also made similar cuts.
There could be some headwinds for Thai banks, as the Moody’s ratings agency said the MLR cut will hit the banks' net interest margins (NIMs). A banking analyst with Asia Plus Securities (APS) told Nikkei Asian Review that the cut was a surprise in a negative way, as such cuts will not boost lending because the sentiment is still not good.
ASP slashed its forecasts for bank net profits by 10% for the second-quarter, following the announcements and warned that if the banks are to cut lending rates further, they will also reduce deposit rates, most likely for short-term saving accounts.
From our technical viewpoint, BBL bounced off the trendline support after the descending wedge breakout failed in early April. The stock is now trading in the range between 160 and 165 baht, with a negative bias to the downside. Shares of Bangkok Bank could pull back near-term to retest the 155 baht trendline support, if the stock can’t find enough upside momentum.
According to the Financial Times, the consensus amongst 28 polled investment analysts covering Bangkok Bank gave the company a Hold rating, with the median 12-month price target of 175 baht a share.
Disclosure: No position and no recommendation for any companies mentioned. |
