Bangkok Bank eyes 5-7% loan growth in 1Q

But it could get worse.

According to Maybank Kim Eng, Bangkok Bank still targets loan growth at 5-7% (vs our forecast of 6%) with 2.2-2.3% NIM (Our forecast: 2.23%) and 10% fee income growth (Our forecast: 9%). However, the bank forecasts only 3-5% loan growth if there is no improvement in the political situation. NPLs increased slightly from the small SME segment in 1Q14.

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However, the overall asset quality remains good. The bank plans to set aside loan loss provisions of THB8.0-8.5bn this year vs our forecast of THB8.1bn (0.45% credit cost).

What’s Our View 1Q14F result preview. Loan growth should be flat QoQ. We expect NIM to drop 3bps QoQ to 2.2% due to the policy rate cut in 1Q14. Non-interest income should grow slightly, thanks to the strong fees from banassurance and mutual fund which could offset the weak loan related fee. OPEX is expected to drop 7% QoQ because of the on-going cost control. 

Focus on loan yield rather than growth. Loan growth should grow at faster rate in 2H14 assuming there a functional government will be in place. We expect NIM to improve in 2Q14 due to the lower deposit competition. We believe that the bank will focus more on pricing/ yield more than the asset growth this year.