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Securities house forecasts profit boom for Thai banking sector
Publication Date : 17-07-2012
Asia Plus Securities is overweight on the Thai banking sector, forecasting a 25-per-cent increase in annualised net profit this year against the relatively low price to book value (PBV) compared with regional peers.
The house expects 10 banks it monitors to post a combined net profit of 161.78 billion baht (US$5.1 billion) this year, up from 129.38 billion baht ($4 billion) last year. Still, their share prices are considered low, reflected through the PBV of 1.7 times, compared with 1.9 in the past year.
"Now the Thai banking sector has PBV in 2012 at 1.7 times, slightly higher than the regional average of 1.5 times but still lower than PBV of above 2 times of banking sectors in such countries as Indonesia, Malaysia and the Philippines, which has been driven by healthy GDP growth as supported by the government investment projects to boost private investment, which is similar to the case of Thailand," it said.
Led by Tisco Financial Group, banks are expected to release their second-quarter results this week. Asia Plus Securities expects Siam Commercial Bank (SCB) to lead the pack, with the forecast first-half earnings of 20.9 billion baht ($662 million), followed by Kasikornbank's 18.11 billion baht ($573 million) and Bangkok Bank's 16.59 billion baht ($525 million).
Still, in terms of growth rates, LH Bank will lead the pack with 35.7 per cent, followed by KBank's 34.8 per cent and Bank of Ayudhya's 23.2 per cent. Expecting aggregate first-half net profit to expand by 14.3 per cent from the same period last year, Asia Plus Securities believes that the second-half growth rate will be 25.5 per cent.
Since the beginning of the year, the banking sector index has increased by 26.3 per cent, outperforming the market average of 18 per cent, thanks to robust growth of the core businesses. These are loans (corporate, SME, retail, and especially car leasing, as many banks could set monthly records in loan issuance given recovering domestic car sales) and fee income (from loan transactions and non-loan-related businesses such as bancassurance, fund unit sales, credit cards and car hire-purchase).
Despite the flood crisis, the majority of banks continued to show record profits.
Growth is assured in the second half, which is the high season for loans to small and medium-sized enterprises and retail lending.
Meanwhile, demand for corporate loans has grown continuously thanks to companies' business expansion, working-capital preparation, overseas investment (to prepare for business opportunities from the Asean Economic Community) and preparation for mergers and acquisitions of big companies in Europe and North America.
In its report released on June 25, CIMB Securities (Thailand) was also overweight on Thai banking stocks. The sector's loan growth reached 5.1 per cent in the first five months of this year, which was on track to reaching its full-year target of 11 per cent.
Tisco and SCB were highlighted as growth outperformers, while growth continued to gather pace at KBank, it said.