Banking Sector

3Q12's profit to make new high continuously. KTB, TISCO, KK most outstanding

3Q12's profit to grow 4.4%qoq. Loan and NIM rise, with

support from Vayupak

Maintain forecast. Profit in 2012-2013 marching to new

high

Maintain Overweight. KBANK and TCAP are top picks

3Q12's profit to grow 4.4%qoq. Loan and NIM rise, with

support from Vayupak

We estimate 3Q12's net profit of 10 commercial banks under our coverage at

B46.2bn, growing 4.4%qoq and 27.9%yoy and hitting another quarterly high

led by KTB, TISCO, and KK. The other banks are also projected to show

remarkable growth, except for BBL and TCAP which we anticipate a quarteron-

quarter (qoq) decline in net profit in this quarter. Contributing factors for

the growth in the net profit can be detailed as follows. 1) Net interest income

in 3Q12 is projected to thrive by 4.3%qoq and 13.5%yoy as expected mainly

from the robust net loan growth of 3.3%qoq and 13.6%yoy despite

repayment of corporate debtors especially for BBL and KTB (overall, net loan

in 9M12 would grow 9.3% from end-2011, in line with our projection for net

loan growth for FY2012 at 13.4%yoy. Magnificent growth is seen from all

types of loans, particularly SME (high season) and car hire-purchase which

has benefited from domestic car sales that made a monthly high in both

Bangkok and provincial areas. Meanwhile, NIM in 3Q12 is anticipated to hike

by 4bp to 2.70% due mainly to an increase of yield, while funding cost has

begun to stabilize despite fierce competition for deposit raising. 2) Fee

income in 3Q12 is anticipated to ascend by 3.9%qoq and 11.2%yoy as

supported by fee income from corporate loan-related transactions. On the

contrary, fee income from other retail transactions such as Bancassurance,

mutual fund, and credit card would decline from 2Q12 in which the fee

income grew robustly in spite of a low season. 3) Dividend income from

1H12's earnings of Vayupak fund is projected at 3% of investment or around

B1.44bn. The banks that will benefit the most are KTB(B840m),

SCB(B320m), and TCAP(B170m). However, despite a negative factor from

high debt provision of many banks in this quarter, not from increasing NPL

but increasing loan issuance and as a preparation for future asset

impairment, the abovementioned positive factors can offset all the effect, so

net profit growth of the sector is still foreseen in 3Q12.

Maintain forecast. Profit in 2012-2013 marching to new high

Although earnings in 9M12 account for 79% of FY2012's net profit forecast,

earnings in 4Q12 of the sector tend to weaken from increasing operating

expense during a high season and increasing debt provision such as for KTB

of which the debt provision usually rises in the 4th quarter. Consequently, we

maintain our net profit forecast projecting the growth of 28%yoy in 2012 and

15.4%yoy in 2013. Strong net loan growth of 13.4%yoy is expected in 2013

as driven by the government's mega investment projects which will also

benefit related private loans. Furthermore, the approaching AEC liberalization

in 2015 will boost loan demands for both local (especially provincial areas)

and regional investment significantly.

Maintain Overweight. KBANK and TCAP are top picks

We assign Overweight for the banking sector. Current share prices of Thai

banking stocks have 2012's PBV at 1.9x, which is slightly higher than the

regional average of 1.5x. However, compared with leading banking stocks in

Indonesia, Malaysia, and the Philippines which have 2012's PBV of above 2x

as a result of support from robust growth of GDP from the government's

investment to boost private investment, which is similar to the situation in

Thailand, we are confident that foreigners would view that Thai banking

stocks have a high chance to be re-rated to be rival to regional peers,

especially for big banks. We select KBANK and TCAP as top picks.

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Source: http://www.news.thethailandlinks.com/2012/10/05/banking-sector/