what happened:

Bangkok Bank Public Company Limited (BBL) disclosed financial targets for 2023 at an analyst meeting. It can be summarized as follows.

  1. Credit cost of around 1%, compared to 1.24% in 2022. BBL expects credit costs to decline as banks will slow down provisioning for management overlays to cope with future uncertainties. Given the bank’s LLR coverage of 261% as of 4Q22, InnovestX Research has revised down its 2023 credit cost estimate by 10 bps to 1.1%, which is slightly more conservative than the bank’s target.
  1. The NPL ratio was around 3.5%, compared to 3.1% (according to the bank’s calculations) at the end of 2022. Loan under the debt relief program dropped to below 10% and remained a quality loan under the adjusted repayment schedule. new
  1. Loan growth of 4-6% versus 4% in 2022 is in line with InnovestX Research’s estimate of 5%.

BBL’s 2023 loan growth targets by loan type include 5-6% for large corporate loans (vs. 6% in 2022), 3% for medium-sized corporate loans (vs. -3% in 2022). , 3% for small business loans (vs. -3% in 2022), 4-6% for retail loans (vs. 4% in 2022), 5-6% for international venture loans (vs. 4% in 2022) and 10-12% for Permata. BBL appears to be more optimistic about its loan growth prospects in 2023, driven by the relocation to ASEAN.

  1. NIM of 2.5% vs. 2.36% in 2022, which believes BBL’s NIM target is overly conservative. Based on the bank’s 4Q22 NIM of 2.79%, InnovestX Research maintains its 2023 NIM forecast at 2.77% (up 41 bps) as BBL benefits from rising interest rates.
  1. Net Fee Income Growth Flat BBL believes transaction fees will continue to come under pressure.
  1. Cost-to-income ratio Low 50% vs. 50% (according to the bank’s calculations) in 2022. The target exceeds InnovestX Research’s estimate of 46.3%.

How it affects:

Over the past 1 month, BBL’s share price increased 8.25%MoM to 164.00 baht, while the SET Index dropped 1.27%MoM to 1,656.01 points.

2023 earnings outlook:

Financial targets for 2023 indicate lower credit costs, better loan growth, rising NIM, stable fee income. and stable cost-to-income ratio

However, InnovestX Research raised its target price for BBL from 180 baht to 197 baht per share (based on 0.7x PBV or 8.55x PE for 2023) mainly due to revised net profit forecasts for 2023 and 2024 to increase by 4% per year. arising from the adjustment of the provisioning estimate

BBL’s net profit is expected to grow 50% in 2023 (the highest among banks), supported by a 14 bps decline in Credit Cost, 5% loan growth, an improving NIM of 41 bps Non- NII at a stable level and a lower cost-to-income ratio, while in 2024 net profit will continue to grow by 11%

Important risk factors to monitor are

  1. Asset quality risk from high inflation and global economic slowdown
  2. the inability to pass on the 23 bps increase in contributions to the FIDF to the loan interest rate; and
  3. Impact of FinTech


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