Siam Commercial Bank's net profit dipped 4% to THB12.6b

The NIM was flat at 3.1%.

According to Maybank Kim Eng, SCB reported a net profit of THB12.6b in2Q13, shrinking 4% QoQ, but growing 29% YoY, inline with market estimates. Loans expanded well, led by home, Auto HP and SME loans.

Here's more:

The NIM was flat at 3.1% and the net-interest-income grew 4% QoQ and 18% YoY. The Non-NII contracted slightly, 4% QoQ, due to a decline in fee and dividend incomes, but Bancassurance premiums and FX gains still grew well. However, the Non-NII still expanded strongly by 20% YoY.

Opex rose 5% QoQ, bringing the cost-to-income ratio up slightly to 38% (still very low). The PPOP was flat QoQ but grew 23% YoY. Provisionswere THB2.7b, up slightly QoQ, as NPLs increased slightly, inline with the industry. But the NPL ratio remained low at 2% with a high 150% coverage ratio.

What’s next? The 1H13 net profit accounted for 51% of our full year projection of THB50.3b, up 25% YoY. We may slightly re-adjust our earnings forecast upward.

We expect SCB to book a large fee on the CPALL-MAKRO deal in 3Q13F, while the loan and Non-NII growth trend remains sound. We still need to keep an eye on the asset quality issues as there have been signs of an economic slowdown.

Recommendation. SCB shares have underperformed the SETBANK Ytd, in contrast with outstanding earnings growth. We believe the current valuation is attractive, trading at a 2.3x PBV and with a 11.3x PER, as compared to a high 21.4% ROE and a 17.5% 3yr EPS CAGR.

We thus reiterate our BUY rating with a target price of THB213 (derived from a 2.66x 2Q14F PBV with a L/T ROE assumption of 22.5%). For the 1H13F DPS, we forecast a THB1.0 payout for a 0.6% dividend yield.