Contents
More positive outlook for 2010....................................................................................... 3
Thai banks are direct beneficiaries of better economic momentum. We project loan growth to recover
by 10% in 2010 after sluggish growth of 1.2% this year. Mortgage loans will likely be the first segment
to turn around followed by SMEs and corporates. Excess liquidity is still ample at 20% of system loans.
A resumption of earnings growth ................................................................................... 7
We project overall 2010 bank earnings to grow 18%, after a drop of 6% in 2009, backed by a
resumption of loan and fee income growth, NIM expansion, as well as easing credit costs. Current
special long-term deposit offerings are unlikely to pressure NIM as excess liquidity will be channelled
through higher-yield lending segments, together with the left-over benefit from a series of broad-based
deposit rate cuts since late last year.
Further re-rating in the offing ....................................................................................... 12
Thai banks’ valuations remain cheap at 1.2x P/BV and 10.7x P/E with improving ROE of 11.4%. We
believe P/E is now a good valuation approach given the more stable earnings outlook. With banks’
strong earnings visibility along with the better economic conditions, we expect valuations to be re-rated
further. SCB and BBL remain our top picks while we replace KTB with KBANK.
P/E and P/BV band charts ........................................................................................... 17
Company updates........................................................................................................ 21
Bank of Ayudhya – REDUCE; CP: THB18.10; TP: THB14.00 (from THB9.40) 22
Bangkok Bank – BUY; CP: THB112.00; TP: THB135.00 (from THB110.00) 24
Kasikornbank – BUY; CP: THB73.00; TP: THB90.00 (from THB77.00) 26
Krung Thai Bank – BUY; CP: THB 8.40; TP: THB9.80 (from THB8.60) 28
Siam Commercial Bank – BUY; CP: THB76.75; TP: THB100.00 (from THB90.00) 30
Siam City Bank – HOLD (from BUY); CP: THB21.60; TP: THB22.00 (from THB9.00) 32
Tisco Financial Group Pcl – HOLD; CP: THB17.90; TP: THB19.00 (from THB17.50) 35
TMB Bank – HOLD; CP: THB1.06; TP: THB1.10 (from THB0.80) 37