Siam Commercial Bank's 4Q12F profit expected to be flat at THB10b

But loans are expected to expand 4.5%.

According to Maybank Kim Eng, SCB shares rose 12% in the past month putting valuations at a pricey 2.5x PBV (+2SD historic average). We believe the current share price has now priced in the positive news on the bank especially the strong earnings growth. 

Here's more from Maybank Kim Eng:

4Q12F profit expected to be flat QoQ at THB10bn. We forecast SCB’ 4Q12 net profit to reach THB10bn, flat QoQ but up 49% YoY. Loans are expected to expand 4.5% QoQ (equivalent to 20.5% YoY on a full year basis) thanks to strong auto hire purchase, mortgages and SMEs loans.

However, the NIM is likely to be slightly squeezed by 5bps QoQ to 3.18% from the interest rate cut in Oct-12. Fee income is projected to grow 5%QoQ, but other income is likely to drop in the absence of dividends from the Vayupak Fund.

We expect opex to rise seasonally, resulting in a slightly higher cost-to-income ratio of 43%. Credit costs are likely to be stable at THBt2.0bn. If our 4Q12 net profit forecast is met, SCB’s full year earnings could reach THB40.5bn, up 12%YoY. Note that if we exclude the extra gain from SCBLIF in 2011, the norm profit growth will be 30%YoY.

Growth sustained in 2013F. We expect growth momentum on loans to continue this year, underpinning our 23%YoY net profit growth forecast to Bt51.3bn. Strong momentum on hire purchase loans will continue as delivery of new car purchases under the First Car Policy spills over to 2013.

We also expect an uptick in the government infrastructure investments by the 2H13F and this will boost demand for corporate loans. We are looking for NIMs to be marginally higher YoY (flat at worst) as SCB increasingly focuses on the higher yield segments.

The Non-NII remains a key growth driver for SCB and more will be known about this in the 8 Jan meeting on 2013F financial target and business strategy.

Limited upside. While are positive on the earnings growth outlook for SCB, the share price outperformance in 2012 has taken the PBV multiple to the pricey level at 2.5xPBV (+2SD historic average).

With a limited upside, we have downgraded our rating to HOLD with the same PT of THB190. Among the big banks our preference is KTB (top pick) on outstanding earnings growth outlook and attractive valuation.