Thai banks to achieve 26% growth target in 2013F

Thanks to solid 3Q13F profits.

Maybank Kim Eng expects the banking sector to see earnings continuing to expand in 3Q13F and achieve the full-year growth target of 26% YoY in 2013F and 17% YoY in 2014F.

Here's more from Maybank Kim Eng:

Loan growth should be buoyed by the numerous private- and government-sector investment projects. The recent slump in share prices has made stock valuations attractive for long-term investment. KTB, BBL and KKP are still our top picks.

Solid 3Q13F profits. Despite slower economic growth, we expect the banking sector to post earnings of THB53.1b for 3Q13F, translating to growth of 6% QoQ and 20% YoY.

BAY, KTB and SCB are likely to report record-high profits, while TCAP would be the only bank to experience a sequential drop in profit in the absence of extraordinary gains.

Loans should continue to expand with NIM flat. Non-NII income is also expected to keep growing on good cost controls. NPLs should have stabilised in 3Q13 after the increase in 2Q13 and provisioning would significantly ease after the extra provisions set aside in 2Q13.

2014F profits to grow 17% YoY. The slowdown in the domestic economy this year will mean an adjustment to the base effect followinglast year’s strong growth. Nevertheless, we expect the economy to return to normal next year and forecast GDP growth of 4.5%.

Domestic consumption should recover and exports improve on global economic resiliency. In our view, the key driver for the Thai economy over the next few years will be the investment from both the public and private sectors.

We believe the government’s THB2t loan bill will help trigger the return of the capex cycle. We forecast sector net profit growth of 26% YoY for 2013F and 17% YoY for 2014F, driven by loan and nonNII growth.

While NPLs may remain a risk, we believe banks’ asset quality is still healthy and extra provisioning this year will fortify the balance sheets. The expected decline in credit costs next year could be another key earnings growth driver.

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