Investors' disappointment on Thailand's economic recovery hurt banks

1H15 could also pressure NIM, meanwhile.

It has been noted that investors are neutral with negative bias on Thai banks as they’re disappointed with the pace of economic recovery.

According to a research note from Maybank Kim Eng, further, it noted that it met more than 30 investors during Maybank Kim Eng's marketing trip in Hong Kong and Kuala Lumpur recently.

It noted that most of them agreed with Maybank Kim Eng that current valuations (of 11x 2015 PER and 1.6x P/BV) are not attractive as there is no positive catalyst to drive up share prices.

Here's more from Maybank Kim Eng:

Investors expect lower sector NIM on the low interest rate. We believe NIM could be under pressure in 1H15 on weak loan demand and recent interest rate cut but on full-year basis, NIM should remain steady on the banks’ ability to manage funding costs and shift into high-yield SME and retail lending.

Investors prefer KTC to others as it has clear earnings visibility given the smaller provision required on good asset quality with very high NPL coverage of 364%. KTC also benefits from interest rate cut on decreasing funding cost and stable loan yield.

Maintain NEUTRAL on banking sector. KTB is our favorite due to (i) better fee income and NIM outlook, (ii) improving asset quality and (iii) undemanding valuation with decent yield. For small banks, we prefer TISCO to KKP and TCAP given its better asset quality with low exposure to used car HP lending.