Fundamental ViewAS OF 23 Feb 2023
Bangkok Bank (BBL: Baa1 (stable)/ BBB+ (stable)/ BBB(stable)) 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%. Management aims to maintain the CET1 ratio ideally at the 15-16% level, but the timelines are unclear.
Its profitability as measured by ROA and ROE is below the industry average, due in part to higher exposure to the lower-yielding corporates segment that has resulted in a lower NIM. That said, this has supported its asset quality outperformance versus peers, and better positions the NIM to benefit from the rising rate environment given that debt servicing capabilities of households and SMEs remain fragile.
Business DescriptionAS OF 23 Feb 2023
- 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 43% corporate (~60% including international loans), 20% SME, 12% retail, and 25% international as at 4Q22. It is by far the most international amongst the Thai banks, with branches in 14 countries.
- 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 & CatalystsAS OF 23 Feb 2023
Profitability has been the main issue with BBL as its returns have perennially been below the industry average. This is down to its primarily corporates focus leading to the lowest margins among its country peers.
However, the greater resilience of corporates against the ill-effects of the COVID-19 pandemic than the SME and retail sectors has made for lower pandemic-related losses and restructured loans, supporting BBL’s asset quality outperformance against its peers. In the current rising rate environment, its corporates focused book should also better withstand rate hike pass throughs, which augurs well for its NIM.
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 MetricsAS OF 23 Feb 2023
|Equity / Assets||11.5%||11.4%||11.8%||13.3%||13.3%|
|Calculated NPL ratio||3.10%||3.20%||3.90%||3.40%||3.40%|
|Provisions / Loans||1.24%||1.38%||1.41%||1.56%||1.07%|
CreditSights ViewAS OF 09 Jun 2023
Bangkok Bank’s strength has been its large corporate portfolio and high capital levels. Returns though have been lower due to thinner corporate margins. BBL completed the acquisition of Indonesia’s Bank Permata (about 12% of its loan book) in 2Q20 which reduced its CET1 ratio to 14%, but this has since been rebuilt to ~15%. 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 China’s reopening which brightens the growth outlook for Thailand. The Thai banks also face some margin pressure but we see this as manageable given the improved growth outlook, particularly for BBL as its large corporates book is better able to withstand loan rate increases.
Recommendation Reviewed: June 09, 2023
Recommendation Changed: January 25, 2023