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Fundamental View
AS OF 22 Dec 2023Bangkok 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%. It is back to ~15% range and management aims to maintain the CET1 ratio at the 15-16% level.
Its profitability (ROA and ROE) has historically below the industry average, due in part to higher exposure to the lower-yielding corporates segment that has resulted in a lower NIM. However, returns are catching up well as this has supported its asset quality outperformance versus peers, and allowed the NIM to benefit better from the rising rate environment as debt servicing capabilities of households and SMEs remain fragile.
Business Description
AS OF 22 Dec 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 44% corporate (~60% including international loans), 19% SME, 12% retail, and 25% international as at end-September 2023. 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 & Catalysts
AS OF 22 Dec 2023Below industry average profitability has been the main issue with BBL due to lower margins as a result of its large corporates segment focus. However, returns have caught up well with peers in 9M23 as the more resilient large corporate book has supported lower credit costs and better BOT rate hike pass through to the NIM than the other Thai banks we cover, given the backdrop of high household debt, challenged SMEs and still sluggish growth momentum. Its lower CASA ratio though is a weakness if deposit competition intensifies meaningfully.
Loan growth has been middling across the Thai banks due to a combination of easing pent-up retail demand and 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 Metrics
AS OF 22 Dec 2023THB mn | FY19 | FY20 | FY21 | FY22 | 9M23 |
---|---|---|---|---|---|
PPP ROA | 2.49% | 1.50% | 1.65% | 1.60% | 2.00% |
ROA | 1.13% | 0.49% | 0.65% | 0.67% | 0.97% |
ROE | 8.5% | 3.9% | 5.6% | 5.9% | 8.4% |
Equity / Assets | 13.3% | 11.8% | 11.4% | 11.5% | 11.6% |
CET1 Ratio | 17.0% | 14.9% | 15.2% | 14.9% | 15.4% |
Calculated NPL ratio | 3.40% | 3.90% | 3.20% | 3.10% | 3.00% |
Provisions / Loans | 1.56% | 1.41% | 1.38% | 1.24% | 1.31% |
Gross LDR | 88% | 84% | 82% | 84% | 86% |
CreditSights View
AS OF 23 Apr 2024Bangkok Bank’s strength has been its large corporate book and strong capital. Returns though have been lower due to thinner corporate margins. 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 >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 large corporate book which will aid stable asset quality and credit costs. Its lower CASA ratio and larger corporate book though makes it more susceptible to NIM pressure this year. We keep BBL on M/P but think its seniors should trade 5-10 bp inside its Thai peers.
Recommendation Reviewed: April 23, 2024
Recommendation Changed: January 25, 2023