BBL (BUY, Fair Price : Bt203.00): Growth momentum intact

20 October 2023
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**Maintain BUY for BBL with a fair price of Bt203. BBL remains our top pick due to its (1) resilient balance sheet, (2) steady net profit growth, (3) higher NIM from interest rate increases, and (4) undemanding valuation. The stock trades at 0.57x PBV’24E. The bank posted stronger-than-expected results in 3Q23. Net profit was solid at Bt11.3bn (+48% YoY, +0.5% QoQ) with a resilient balance sheet. Basically, net profit in 4Q23 is likely the lowest quarter due to seasonally high operating expenses. However, the profit will rise YoY mainly due to higher net interest income from NIM expansion and higher net gain on financial instruments designed at fair value through profit or loss (FVTPL). Given stronger-than-expected results in 4Q23 and potential gains from the recent interest rate increases, it is likely that its net profit will be higher than our expectations of 39.1% in 2023. **

Solid 3Q23 performance

• Net profit in 3Q23 was Bt11.3bn (+48.2% YoY, +0.5% QoQ), which was 6% higher than expected on NIM improvement. The strong YoY rise was underpinned by (1) higher net interest income on loan growth and NIM expansion and lower provisions. The minimal QoQ rise was because higher net interest income was offset by a lower on financial instruments designed at fair value through profit or loss (FVTPL)

• Its net profit in 9M23 was Bt32.8bn, up 51% YoY, supported by higher net interest income and a lower loss on investment.

• Loan growth increased by 0.9% QoQ, largely due to higher corporate loans and loans made through the Bank’s international network. Loans in 9M23 slightly increased by 1.5% YTD.

• The NPL ratio slightly increased to 3%. The LLC ratio decreased to 283.3%, the highest level among Thai banks.Steady growth ahead

• With additional benefits from the interest rate hike upcycle in 4Q23 and efficient cost management, it is likely that BBL’s net profit will be higher than our estimations of Bt40.8bn (+39.1%).

• Despite expected slower growth of in 2024, BBL’s net profit growth will remain solid and likely outperform peer banks thanks to its resilient loan quality, NIM improvement, and credit cost reductions.Maintain BUY with a fair price of Bt203Our valuation is derived from the GGM model (ROE 8.5%, growth 2%), which implies a 0.7x PBV’24E, -0.5SD below its ten-year average.