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Fundamental View
AS OF 02 Dec 2024Bangkok Bank (BBL: Baa1(stb)/BBB+(stb)/BBB(stb)) is a family run conservative financial institution, with high capital and liquidity levels.
It acquired Indonesia’s Permata Bank in 2020 which resulted in a meaningful decline in its CET1 ratio to 14%. It is back to ~16% range and management aims to keep the CET1 ratio at ~16% in prepartion for Basel III final reforms.
Profitability (ROA and ROE) has historically been below the industry average, due in part to higher exposure to the lower-yielding corporates segment that has resulted in a lower NIM. However, the returns gap has narrowed as this has supported its asset quality outperformance versus peers in the current sluggish macroeconomic environment.
Business Description
AS OF 02 Dec 2024- Bangkok Bank was set up in 1944 and was listed on the Stock Exchange of Thailand in 1975. It is a family-run bank and the current President of the bank, Chartsiri Sophonpanich, is the grandson of the founder of the bank.
- It is the largest bank by assets in Thailand. It was briefly surpassed by Kasikornbank in 2018, but the Bank Permata acquisition has taken BBL back to No.1.
- The bank is corporate-loan focused, and the loan book was split 46% corporate, 18% SME, 12% retail, and 24% international as at end-September 2024. It is by far the most international amongst the Thai banks, with branches in 14 economies.
- BBL's overseas presence has been enhanced by the acquisition of Bank Permata, the 12th largest bank in Indonesia. Bank Permata's asset size is ~10% of that of BBL.
Risk & Catalysts
AS OF 02 Dec 2024Returns have caught up well with peers as the more resilient large corporate book has supported lower credit costs and better BOT rate hike pass through to the NIM, given the backdrop of high household debt, challenged SMEs and sluggish growth momentum. However, we see greater NIM pressure on BBL than most peers henceforth as rate cuts flow through, due to its larger domestic and international corporate loan book (which tend to be floating rate).
Loan growth has been middling across the Thai banks due to a focus on quality amid the current backdrop.
The acquisition of Bank Permata of Indonesia in May 2020 provides BBL with exposure to the high growth opportunities of the Indonesian market, which is the bank’s identified main base for overseas expansion, but this also presents higher risks.
Key Metric
AS OF 02 Dec 2024| THB mn | FY20 | FY21 | FY22 | FY23 | 9M24 |
|---|---|---|---|---|---|
| PPP ROA | 1.50% | 1.65% | 1.60% | 1.92% | 2.08% |
| ROA | 0.49% | 0.65% | 0.67% | 0.93% | 1.03% |
| ROE | 3.9% | 5.6% | 5.9% | 8.1% | 8.5% |
| Equity / Assets | 11.8% | 11.4% | 11.5% | 11.8% | 12.3% |
| CET1 Ratio | 14.9% | 15.2% | 14.9% | 15.4% | 16.6% |
| Calculated NPL ratio | 3.90% | 3.20% | 3.10% | 2.70% | 3.40% |
| Provisions / Loans | 1.41% | 1.38% | 1.24% | 1.26% | 1.35% |
| Gross LDR | 84% | 82% | 84% | 84% | 85% |
| Liquidity Coverage Ratio | 291% | 270% | 271% | n/m | n/m |
CreditSight View Comment
AS OF 22 Oct 2024Bangkok Bank’s strength has been its large corporate book and strong capital. Returns though have been lower due to thinner corporate margins, and we see greater NIM pressure on BBL than most peers from the turn in base rates. BBL completed the acquisition of Indonesia’s Bank Permata (~12% of loans) in 2Q20 which reduced its CET1 ratio to 14%, but it has since rebuilt it to >16%. While disclosure from BBL is less than other key Thai banks and both systems face an overhang of COVID relief loans, we take comfort from BBL’s strong loss buffers and large corporate book which will aid stable asset quality and credit costs. We keep BBL on M/P but think its seniors should trade around 5 bp inside its Thai peers.
Recommendation Reviewed: October 22, 2024
Recommendation Changed: January 25, 2023
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