Contents
Turnaround in sight 3
Margins to rebound as excess liquidity runs off 3
Mortgages a bright spot in asset growth 3
Fee income growth remains a key growth area 4
Asset quality has been benign; do not expect it to change 4
Raising earnings to factor stronger NII growth, lower credit costs 4
Profitability to return to FY08 levels by FY11F 4
Valuations remain undemanding: there is a margin of safety 4
Capital management possibility is another positive 5
Upgrading the sector to Bullish 5
Recommendation summary 6
Back to normalised levels 7
We spot a sharp fall in margins due to a spike in excess liquidity and a fall in
short-term rates 7
Sensitivity of earnings to NII 10
Mortgages are the bright spot 11
Mortgages have been the bright spot in loan growth 11
Mortgages are on cusp of secular growth 11
Fee income: good times to continue 15
Credit cards, transaction fees and third-party sales driving fee growth 15
We expect the trend to continue 16
Smooth sailing 19
Asset quality has held up well 19
Reducing credit cost assumptions 20
Trend in restructured assets is a negative, but not too concerned at this point 20
Capital management to increasingly come into focus 22
We see growth as less capital-intensive in the next two years 22
Expect a material increase in payout ratios 22
Upgrade to Bullish 24
Profitability could return to FY08 levels 24
Raising earnings 25
Latest company views
Kasikornbank 29
Siam Commercial Bank 35
Bangkok Bank 41
Bank of Ayudhya 46
Appendix 52