Bangkok Bank gets local banking operation approval from Myanmar

It's the beginning of a long journey.

Myanmar has granted preliminary approval for Bangkok Bank (BBL) to set up limited local banking operations.

According to a research note from Maybank Kim Eng, BBL has a sizeable international banking operation.

International lending accounted for 16.3% of its total lending as at end-Jun 2014. The bank has maintained a representative office in Yangon since 1995.

The report noted that it believes there should be loan demand from Thai firms investing in Myanmar as Thailand is the second-largest foreign investor in Myanmar.

Here's more from Maybank Kim Eng:

Loan demand should rebound in 4Q14. BBL’s corporate and SME loan demand was weak in 9M14, while its housing loans should grow 8-10% this year.

We maintain our 5% loan-growth forecast for FY14, on strong business-loan demand expected in 4Q14.

Expect 3Q14E weakness. 8M14 loan growth was 1.4% YTD, with August’s at 5.1% YoY. This was in line with guidance of 3-5%. NIM should have stayed strong at 2.35% in 3Q14 from an unusually-high LDR of 93% vs sub-90% normally, owing to a smaller deposit base.

Non-interest income should have improved YoY but dropped 7% QoQ due to high dividend income in 2Q14.

Opex should have dropped QoQ with cost-to-income likely down to 43% from 45% in 2Q14. We assume 56bp provisions for 3Q14 vs guidance of 45bp for the full year, owing to rising NPLs.

BBL has been a laggard. BUY with TP of THB240, implying 1.3x 2015E P/BV and 12% ROE.