Research and consultancy, Tabbush Report

Daniel Tabbush

Research and consultancy

Tabbush Report

We provide research and consultancy on Asian banks. Our focus is on what we call “Asian bank research, without the noise.” We are interested in the most critical swing-factors for banks, the NPL and credit cycle, and where we believe there is a gap between perception and reality. We often focus on the less studied components of bank financial statements.  Our research is highly thematic, sometimes examining unlisted banks and companies as a window on mainstream banks. 

Being independent allows us to look at smaller banks, often overlooked by others. Analysis of BIS bank guidelines in the context of Asia, is also a focal point, while we also analyze global banks operating in the region. We use what we believe is the most comprehensive, reliable financials database, SNL Financial. S&P Capital IQ augments our database, with corporate data and CEIC, with economics. 

Asian bank research, without the noise.

Equity Bottom-Up

<ul>
<li>Where there are many other areas of interest in Asia, globally, the figures just out for Bangkok Bank are incredible to us, not in a positive way.</li>
<li>The bank has seen its NPLs rise from THB71bn to THB85bn to THB92bn from 4Q23 to 2Q24 to 3Q24, putting YTD growth at 29%</li>
<li>The bank has more than 1/4 of its loans in manufacturing &amp; commercial where loan balances are down 4.0% YTD and down 4.3% QoQ</li>
</ul>


Where there are many other areas of interest in Asia, globally, the figures just out for Bangkok Bank are incredible to us, not in a positive way.
The bank has seen its NPLs rise from THB71bn to THB85bn to THB92bn from 4Q23 to 2Q24 to 3Q24, putting YTD growth at 29%
The bank has more than 1/4 of its loans in manufacturing &amp; commercial where loan balances are down 4.0% YTD and down 4.3% QoQ


Bangkok Bank - BBL Sees 29% Higher NPLs YTD and Core Manufacturing & Commercial Loans -4% YTD

Head of Research, Krungthai XSpring

Waraporn Wiboonkanarak

Head of Research

A full service Thai brokerage

Krungthai XSpring

Krungthai XSpring is a full service broker. The company provides a wide range of investment services such as Securities Brokerage, Derivative Agent Business, Securities Borrowing and Lending, Securities Trading, Underwriting, Financial Advisory, Wealth Advisory, Private Fund Management and International Markets Securities Trading. 

In terms of credibility, Fitch Ratings has assigned Krunghtai XSpring a long-term rating of AA- and a national short-term rating of F1+ with stable outlook.

Thematic (Sector/Industry)

<ul><li>The 3Q24E performances of the four mid- to large-sized banks under our coverage should not be particularly impressive, reflecting cautious market sentiment.</li><li>This is evident in an expected contraction in loan portfolios and high levels of provisions, while net interest margins (NIM) are anticipated to decline slightly QoQ.</li><li>We estimate total net profit to be around Bt38.6bn, representing a 4.3% YoY increase but a 3.0% QoQ decline. </li></ul>

The 3Q24E performances of the four mid- to large-sized banks under our coverage should not be particularly impressive, reflecting cautious market sentiment.This is evident in an expected contraction in loan portfolios and high levels of provisions, while net interest margins (NIM) are anticipated to decline slightly QoQ.We estimate total net profit to be around Bt38.6bn, representing a 4.3% YoY increase but a 3.0% QoQ decline. 

Banking - Banks’ Overall Earnings Outlook in 3Q24E Not Particularly Impressive

<ul><li>KTX has revised its outlook on the policy interest rate, anticipating a potential 25 bps cut in 4Q24E, following the sharp appreciation of the baht, while rates are expected to remain steady in 2025E.</li><li>This anticipated cut could negatively impact profit estimates for the banking sector in 2025-26E by approximately 2.1%.</li><li>When valuing bank stocks using the earnings yield method, the advantages of lower interest rates are insufficient to offset the increase in the assumed market risk premium (MRP), as most banks have a high beta. </li></ul>

KTX has revised its outlook on the policy interest rate, anticipating a potential 25 bps cut in 4Q24E, following the sharp appreciation of the baht, while rates are expected to remain steady in 2025E.This anticipated cut could negatively impact profit estimates for the banking sector in 2025-26E by approximately 2.1%.When valuing bank stocks using the earnings yield method, the advantages of lower interest rates are insufficient to offset the increase in the assumed market risk premium (MRP), as most banks have a high beta. 

Banking - Small Banks Likely to Gain from Rate Cuts - October 1, 2024

<ul><li>KTX expects that the sale of Type A investment units of the Vayupak 1 Fund (VAYU1), scheduled for September 16-20, will meet the target of Bt150bn, with Bt50bn from individual investors and Bt100bn from institutional investors. (Note: these proportions may vary slightly depending on the authorities' discretion.)</li><li>The fund guarantees the principal and offers a minimum annual return of 3% (up to a maximum of 9%) over 10 years.</li><li>This attractive return, combined with high liquidity, is expected to encourage individual investors to shift funds from bank deposits to VAYU1 for better returns. </li></ul>

KTX expects that the sale of Type A investment units of the Vayupak 1 Fund (VAYU1), scheduled for September 16-20, will meet the target of Bt150bn, with Bt50bn from individual investors and Bt100bn from institutional investors. (Note: these proportions may vary slightly depending on the authorities' discretion.)The fund guarantees the principal and offers a minimum annual return of 3% (up to a maximum of 9%) over 10 years.This attractive return, combined with high liquidity, is expected to encourage individual investors to shift funds from bank deposits to VAYU1 for better returns. 

Special Report – Vayupak Fund 1 (VAYU1)

Cross Asset Strategy

<ul><li>We expect economic growth in 2H24E to accelerate beyond the 1.9% YoY expansion seen in 1H24E, serving as a key driver in achieving the revised 2024E GDP growth forecast of 2.55% YoY (up from 2.5% previously).</li><li>This acceleration will also create positive sentiment for stocks benefiting from a top-down approach, particularly those related to government spending, tourism, and the banking sector.</li><li>Government spending is expected to rise thanks to accelerated budget disbursements, while the tourism sector should see strong gains, with tourist arrivals projected to hit 36.5mn by yearend (compared to 20.6mn for 7M24). </li></ul>

We expect economic growth in 2H24E to accelerate beyond the 1.9% YoY expansion seen in 1H24E, serving as a key driver in achieving the revised 2024E GDP growth forecast of 2.55% YoY (up from 2.5% previously).This acceleration will also create positive sentiment for stocks benefiting from a top-down approach, particularly those related to government spending, tourism, and the banking sector.Government spending is expected to rise thanks to accelerated budget disbursements, while the tourism sector should see strong gains, with tourist arrivals projected to hit 36.5mn by yearend (compared to 20.6mn for 7M24). 

Economic Update: 2Q24 GDP Growth - August 20, 2024

Thailand

SCB X Public Company Limited provides banking services. The Bank offers accounts, loans, cards, deposits, insurance, investment, payment, digital banking, and other related services. SCB X serves customers worldwide.

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Siam Commercial Bank (SCB TB)

Bangkok Bank - BBL Sees 29% Higher NPLs YTD and Core Manufacturing & Commercial Loans -4% YTD

BBL is seeing dwindling loan balances in its core segment - manufacturing and commercial loans are -4% YTD. And what's worse: its NPLs are surging,...

Daniel Tabbush

Banking - Banks’ Overall Earnings Outlook in 3Q24E Not Particularly Impressive

The 3Q24E performances of the four mid- to large-sized banks under our coverage should not be particularly impressive, reflecting cautious market...

Krungthai XSpring

Banking - Small Banks Likely to Gain from Rate Cuts - October 1, 2024

KTX has revised its outlook on the policy interest rate, anticipating a potential 25 bps cut in 4Q24E, following the sharp appreciation of the...

Krungthai XSpring

Special Report – Vayupak Fund 1 (VAYU1)

KTX expects that the sale of Type A investment units of the Vayupak 1 Fund (VAYU1), scheduled for September 16-20, will meet the target of Bt150bn

Krungthai XSpring

Economic Update: 2Q24 GDP Growth - August 20, 2024

We expect economic growth in 2H24E to accelerate beyond the 1.9% YoY expansion seen in 1H24E, serving as a key driver in achieving the revised...

Krungthai XSpring

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