Asia Pacific Equity Research 16 July 2015
ASEAN Banks A credit cycle in the making; 2Q to indicate depth and duration The region is entering a credit cycle, save for The Philippines. This is showing up in slower loan growth, higher NPL formation, NIM pressure and tighter credit standards. While Asean banks are down ~6% YTD, the depth and duration of AQ cycle is not clear yet. We expect negative revisions post 2Q earnings and expect discussions around capital calls and M&A. We think Indonesia and Thailand appear more at risk, while Malaysia is at a crossroads. Singapore should hold up, while The Philippines is our only OW. Singapore: We expect a 2% q/q decline in 2Q net income but up 7% y/y. Key 2Q trends would include: i) 1% q/q loan gr (11.6% y/y), ii) 4bps q/q pickup in NIMs partly offsetting some of the volume headwinds; iii) 7bps sequential pickup in credit costs, to 29bps, would weigh on returns; iv) 6% sequential slowdown in non-interest income driven by muted fee growth of 2% q/q. DBS (Fed rates) and OCBC (capital) remain OWs, while UOB is UW on lower leverage to rates and possible asset quality issues in Asean and SG property loans. Indonesia: We expect guidance on “2H pick-up” to shift toward next year in 2Q briefings. Profits should decline 1% q/q but up 5.7% y/y. Key 2Q earnings drivers would include: i) 38bps q/q pickup in credit costs to 183bps (ann.) as NPLs rise 35bps YTD; ii) ~5bps of margin compression as banks shift to higher quality assets to protect the balance sheet at the cost of yields, iii) loan growth slowing down further to 6% y/y and 2% q/q. BBNI profits should decline 28% q/q on higher provisions, and is most at risk. Malaysia: We expect 17% q/q decline in 2Q net income (8% ex-CIMB) and 20% y/y decline (11% y/y ex-CIMB). Key 2Q earnings drivers would include: i) 2bps of NIM compression, especially among smaller banks as yields trend lower amidst high CoF; ii) weak fee income growth of 2% q/q, 9% y/y; and iii) 7bps sequential pick up in credit costs, to 24bps (ann). PBK is our top pick while we hold UW on AMM and RHBC. Philippines: We expect 2Q net income to decline 8% q/q as earnings normalize from an unusually strong bond trading quarter, but the favorable credit environment should underpin robust core income growth (NII up 4.5% q/q, fees up 12% q/q). We are watching: (1) loan growth at the bank level, esp. with system loan growth declining to 14.5% y/y as of May-15, (2) NIMs (broadly flat q/q), and (3) non-II (-12.3% q/q) and trading income (-51.3% q/q). EW and SECB remain our top picks, while Big 3 are getting close to relative value levels.
ASEAN Banks Harsh Wardhan Modi
AC
(65) 6882- 2450
[email protected] J.P. Morgan Securities Singapore Private Limited
Anne Jirajariyavech, CFA
AC
(66-2) 684-2684
[email protected] Bloomberg JPMA JIRAJARIYAVECH
JPMorgan Securities (Thailand) Limited
Anurag Rajat, CFA (852) 2800-8511 [email protected] J.P. Morgan Securities (Asia Pacific) Limited
Vanice Siew (60-3) 2718-0708 [email protected] JPMorgan Securities (Malaysia) Sdn. Bhd. (18146-X)
Daniel Andrew O. Tan (63-2) 554-2413 [email protected] J.P. Morgan Securities Philippines, Inc.
Josh Klaczek (852) 2800-8534 [email protected] J.P. Morgan Securities (Asia Pacific) Limited
Aditya Srinath, CFA (62-21) 5291-8573 [email protected] PT J.P. Morgan Securities Indonesia
Thailand: We expect 8.8% q/q decline in 2Q net income and 10.2% decline y/y. Key 2Q earning drivers would include: i) 17bps q/q of NIM compression after the April rate cut, ii) 112bps of credit costs (flat q/q) on back of 11bps of NPL formation, taking NPL ratio to 2.97% and coverage to 149%; iii) 4.5% q/q decline in non-NII growth due to weaker bancassurance and economic activity; and iv) higher CIR of 46.9% on 2.7% lower revenues. We remain underweight on Thai banks and particularly worried about KTB.
See page 46 for analyst certification and important disclosures, including non-US analyst disclosures. J.P. Morgan does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. www.jpmorganmarkets.com
Harsh Wardhan Modi (65) 6882- 2450 [email protected]
Asia Pacific Equity Research 16 July 2015
Table of Contents ASEAN Banks ...........................................................................3 Price Performance....................................................................4 Singapore Banks ......................................................................5 DBS Group Holdings (DBS) ...................................................................................7 United Overseas Bank (UOB)..................................................................................8 OCBC Bank............................................................................................................9
Indonesia Banks .....................................................................10 PT Bank Mandiri Tbk. (BMRI) .............................................................................13 Bank Rakyat Indonesia (BBRI) .............................................................................14 Bank Negara Indonesia Persero(BBNI)..................................................................15 Bank Danamon (BDMN).......................................................................................16 Bank Central Asia (BCA)......................................................................................17
Malaysia Banks.......................................................................18 AMMB Holdings ..................................................................................................21 CIMB Group Holdings..........................................................................................22 Hong Leong Bank .................................................................................................23 Maybank (Malayan Banking) ................................................................................24 Public Bank ..........................................................................................................25 RHB Capital .........................................................................................................26
Philippine Banks.....................................................................27 Bank of the Philippine Islands (BPI)......................................................................31 Security Bank Corporation (SECB) .......................................................................32 Banco de Oro (BDO).............................................................................................33 Metropolitan Bank (MBT).....................................................................................34 East West Banking Corporation (EW) ...................................................................35 Philippine National Bank (PNB)............................................................................36
Thailand Banks .......................................................................37 Bank of Ayudhya (BAY).......................................................................................40 Bangkok Bank Public Co Ltd (BBL) .....................................................................41 Kasikornbank Plc (KBANK) .................................................................................42 Krung Thai Bank Pub Co Ltd (KTB) .....................................................................43 Siam Commercial Bank Pub Co (SCB)..................................................................44 Tmb Bank Pcl (TMB)............................................................................................45
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Asia Pacific Equity Research 16 July 2015
Harsh Wardhan Modi (65) 6882- 2450 [email protected]
ASEAN Banks Table 1: ASEAN Bank Valuation Tickers
Rating
LC
Mkt Cap $Bn
12M ADT $Mn
FY15E
FY16E
FY17E
FY15E
FY16E
FY17E
FY15E
FY16E
FY17E
FY15E
FY16E
FY17E
CMP
P/E (x)
P/BV (x)
Div yield (%)
RoE (%)
Singapore DBS SP
OW
21.2
39.0
53.87
11.9
11.2
10.3
1.36
1.28
1.20
2.8
2.9
3.0
11.6
11.6
11.9
UOB SP
UW
23.2
27.3
38.41
12.0
11.7
11.8
1.30
1.25
1.20
3.4
3.7
3.9
11.1
10.9
10.3
OCBC SP
OW
10.2
30.3
34.77
10.7
9.9
9.5
1.31
1.24
1.18
3.7
3.9
3.9
12.4
12.8
12.7
BBRI IJ
OW
10,125.0
18.7
25.79
10.2
9.0
7.9
2.16
1.85
1.59
2.4
3.3
3.8
22.9
22.2
21.6
BBNI IJ
N
5,075.0
7.1
11.76
8.2
7.3
6.2
1.43
1.24
1.07
2.4
2.7
3.2
18.7
18.2
18.5
BBCA IJ
UW
13,500.0
25.0
13.77
19.2
18.3
17.2
3.63
3.15
2.77
1.0
1.2
1.5
20.5
18.5
17.1
BMRI IJ
N
10,000.0
17.5
19.23
10.9
10.0
8.7
1.98
1.73
1.52
2.3
2.5
2.9
19.4
18.5
18.6
BDMN IJ
N
4,165.0
3.0
1.02
11.7
8.5
6.9
1.14
1.05
0.95
2.7
3.5
4.4
10.1
12.8
14.5
CIMB MK
N
5.4
11.9
13.49
14.0
10.0
8.3
1.14
1.05
0.96
2.8
3.4
4.0
8.4
11.0
12.2
AMM MK
UW
5.9
4.7
6.76
9.2
13.0
11.9
1.23
1.17
1.12
4.6
4.1
4.1
13.9
9.2
9.6
HLBK MK
N
13.5
6.4
3.12
12.2
11.9
11.0
1.61
1.48
1.37
3.3
3.3
3.4
13.8
13.0
12.9
PBK MK
OW
19.0
19.3
23.66
15.6
14.2
12.8
2.41
2.20
2.01
2.9
3.2
3.4
16.1
16.2
16.4
MAY MK
N
9.2
23.1
23.78
13.0
12.5
12.1
1.55
1.47
1.40
6.3
6.5
6.7
12.2
12.0
11.8
RHB MK
UW
7.5
5.1
2.81
11.1
10.9
10.2
1.07
0.99
0.93
0.8
2.0
2.7
9.8
9.4
9.4
Indonesia
Malaysia
Philippines BPI PM
N
94.6
8.2
3.51
17.1
15.3
13.3
2.35
2.15
1.95
2.1
2.5
2.7
14.4
14.7
15.4
BDO PM
N
105.0
8.3
8.12
15.5
13.9
12.2
1.91
1.74
1.57
2.0
2.0
2.0
13.1
13.1
13.5
MBT PM
N
91.2
6.4
7.57
14.9
12.2
10.3
1.55
1.43
1.29
1.1
1.1
1.1
11.8
12.2
11.3
PNB PM
N
63.8
1.8
0.43
13.2
10.2
9.4
0.78
0.73
0.69
-
-
3.1
6.1
7.4
7.5
SECB PM
OW
152.4
2.0
3.24
11.8
11.9
10.8
1.68
1.51
1.36
1.3
1.6
1.6
15.4
13.4
13.2
EW PM
OW
20.4
0.7
0.31
10.4
8.0
6.2
0.95
0.85
0.75
-
-
-
9.6
11.3
12.9
SCB TB
N
152.0
15.1
29.13
10.6
10.6
10.1
1.65
1.52
1.41
3.9
4.3
4.6
16.2
14.9
14.4
KBANK TB
N
190.0
13.3
39.70
11.1
10.8
10.1
1.58
1.42
1.29
2.3
2.3
2.5
15.0
13.9
13.4
KTB TB
UW
17.3
7.1
31.39
8.5
9.2
8.8
0.97
0.91
0.86
4.7
4.3
4.6
11.9
10.2
10.0
BBL TB
N
173.0
9.7
29.16
11.7
11.6
11.5
0.97
0.93
0.89
3.9
3.9
4.0
8.5
8.2
7.9
BAY TB
N
33.0
7.1
2.96
10.5
9.0
NA
1.41
1.29
1.02
4.2
4.8
6.1
13.9
14.9
7.5
TISCO TB
N
45.0
1.1
1.74
7.6
7.3
NA
1.26
1.13
NA
5.0
5.2
NA
17.5
16.4
15.4
Thailand
TMB TB
UW
2.4
3.1
15.86
17.1
18.5
NA
1.41
1.33
1.27
1.7
1.7
1.7
8.6
7.6
7.1
KKP TB
UW
33.8
0.8
1.30
8.8
7.0
6.6
0.77
0.73
0.69
7.4
7.4
7.4
8.8
10.6
10.7
TCAP TB
UW
33.3
1.1
3.19
7.8
7.3
7.3
0.78
0.73
0.69
4.8
5.1
5.4
10.3
10.3
9.7
Source: Company reports, J.P. Morgan estimates, Bloomberg prices as on 15 July, 2015.
3
Asia Pacific Equity Research 16 July 2015
Harsh Wardhan Modi (65) 6882- 2450 [email protected]
Price Performance Figure 1: Three-months price performance % 5.0%
0.0%
-5.0%
-10.0%
-15.0%
-20.0%
-25.0%
-30.0%
3 months price change % TCAP
TISCO
MAY
PBK
DBS
DBS
PBK
TCAP
MBT
UOB
BBCA
RHBC
HLBK
OCBC
MBT
AMM
BBCA
BBL
BPI
SECB
BDO
KKP
EW
CIMB
PNB
SCB
BDMN
BMRI
KBANK
TMB
BBRI
BAY
KTB
BBNI
-35.0%
Source: Bloomberg.
Figure 2: YTD price performance % 15.0% 10.0% 5.0% 0.0% -5.0% -10.0% -15.0% -20.0% -25.0%
YTD Price performance%
Source: Bloomberg.
4
TISCO
BPI
SECB
MAY
RHBC
OCBC
HLBK
CIMB
BDO
UOB
BMRI
BDMN
BBL
AMM
EW
BBRI
KKP
BBNI
SCB
KBANK
TMB
PNB
KTB
BAY
-30.0%
Harsh Wardhan Modi (65) 6882- 2450 [email protected]
Asia Pacific Equity Research 16 July 2015
Singapore Banks We expect the ROE of Singapore Banks to decline in 2Q15-4Q15 from 1Q levels on the back of weak credit demand and worsening asset quality. The investment case for the sector is a function of rates, margins and NPL formation. Table 2: Singapore Industry DuPont Du Pont Item
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15E
3Q15E
4Q15E
NIM
1.69
1.69
1.69
1.69
1.69
1.73
1.74
1.76
NII/Assets
1.42
1.44
1.47
1.46
1.43
1.49
1.51
1.53
Non II/Assets
0.91
0.87
0.94
0.76
0.92
0.85
0.90
0.81
Rev/Assets
2.29
2.30
2.35
2.19
2.33
2.33
2.38
2.32
Costs/Assets
0.96
0.98
1.02
1.01
1.01
1.00
1.01
1.02
Costs/income
41.22
42.71
42.38
45.60
42.72
42.79
41.99
43.59
Opt Profits/Assets
1.36
1.32
1.39
1.21
1.35
1.34
1.39
1.32
Credit Cost
0.20
0.23
0.26
0.28
0.22
0.29
0.30
0.37
ROA
1.09
1.01
1.13
0.85
1.03
0.96
1.00
0.87
A/E
12.64
12.45
12.33
12.28
12.08
11.92
11.83
11.92
ROE
13.80
12.58
14.07
10.39
12.47
11.39
11.74
10.38
Source: Company reports and J.P. Morgan estimates.
We expect margins to start improving as the rates continue to rise…
…DBS remains the best play on Fed rate
Table 3: NIM (%) 1Q14
2Q14
3Q14
4Q14
1Q15
2Q15E
3Q15E
4Q15E
DBS
1.65
1.67
1.68
1.71
1.69
1.76
1.79
1.79
UOB
1.73
1.71
1.71
1.69
1.75
1.76
1.76
1.77
OCBC
1.70
1.70
1.67
1.67
1.62
1.67
1.68
1.73
Sector
1.69
1.69
1.69
1.69
1.69
1.73
1.74
1.76
Source: Company reports and J.P. Morgan estimates.
Table 4: Non-II/Total Assets (%) Non-II likely to remain flat in 2015E
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15E
3Q15E
4Q15E
DBS
0.94
0.72
0.87
0.62
0.93
0.69
0.85
0.74
UOB
0.89
0.89
1.09
0.89
0.97
1.00
0.97
0.85
OCBC
0.90
0.98
0.87
0.77
0.85
0.86
0.86
0.83
Sector
0.91
0.87
0.94
0.76
0.92
0.85
0.90
0.81
Source: Company reports and J.P. Morgan estimates.
Table 5: Revenue/Total Assets 1Q14
2Q14
3Q14
4Q14
1Q15
2Q15E
3Q15E
4Q15E
DBS
2.34
2.22
2.37
2.12
2.40
2.30
2.47
2.37
UOB
2.37
2.40
2.60
2.41
2.49
2.56
2.53
2.43
OCBC
2.16
2.27
2.09
2.03
2.09
2.13
2.15
2.16
Sector
2.29
2.30
2.35
2.19
2.33
2.33
2.38
2.32
Source: Company reports and J.P. Morgan estimates. 5
Harsh Wardhan Modi (65) 6882- 2450 [email protected]
Asia Pacific Equity Research 16 July 2015
Table 6: Cost to Assets % 1Q14
2Q14
3Q14
4Q14
1Q15
2Q15E
3Q15E
4Q15E
DBS
1.01
1.01
1.05
1.04
1.05
1.05
1.08
1.08
UOB
1.04
1.06
1.07
1.06
1.10
1.08
1.08
1.07
OCBC
0.83
0.88
0.94
0.93
0.87
0.88
0.88
0.91
Sector
0.96
0.98
1.02
1.01
1.01
1.00
1.01
1.02
Source: Company reports and J.P. Morgan estimates.
Table 7: Operating Profit/Total Assets (%) 1Q14
2Q14
3Q14
4Q14
1Q15
2Q15E
3Q15E
4Q15E
DBS
1.37
1.20
1.34
1.12
1.39
1.25
1.41
1.31
UOB
1.37
1.35
1.56
1.37
1.42
1.50
1.48
1.37
OCBC
1.35
1.41
1.27
1.13
1.23
1.27
1.29
1.27
Sector
1.36
1.32
1.39
1.21
1.35
1.34
1.39
1.32
Source: Company reports and J.P. Morgan estimates.
Table 8: Credit costs (%) Expect credit cost to increase in the coming quarters
Du Pont Item
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15E
3Q15E
4Q15E
DBS
0.24
0.20
0.27
0.27
0.26
0.29
0.30
0.38
UOB
0.26
0.32
0.30
0.31
0.27
0.35
0.39
0.51
OCBC
0.09
0.18
0.20
0.28
0.12
0.22
0.22
0.22
Sector
0.20
0.23
0.26
0.28
0.22
0.29
0.30
0.37
Source: Company reports and J.P. Morgan estimates.
Table 9: ROA (%) 1Q14
2Q14
3Q14
4Q14
1Q15
2Q15E
3Q15E
4Q15E
DBS
1.20
0.93
0.96
0.77
1.13
0.88
1.01
0.87
UOB
1.05
1.05
1.12
1.00
1.00
1.06
1.02
0.85
OCBC
1.04
1.05
1.32
0.78
0.97
0.93
0.95
0.89
Sector
1.09
1.01
1.13
0.85
1.03
0.96
1.00
0.87
Source: Company reports and J.P. Morgan estimates.
Table 10: Asset/Equity 1Q14
2Q14
3Q14
4Q14
1Q15
2Q15E
3Q15E
4Q15E
DBS
12.04
11.93
11.80
11.87
11.92
11.86
11.72
11.69
UOB
11.77
11.63
11.46
11.32
11.07
10.88
10.79
11.05
OCBC
14.10
13.80
13.74
13.65
13.26
13.03
12.97
13.04
Sector
12.64
12.45
12.33
12.28
12.08
11.92
11.83
11.92
Source: Company reports and J.P. Morgan estimates.
Table 11: ROE (%) 1Q14
2Q14
3Q14
4Q14
1Q15
2Q15E
3Q15E
4Q15E
DBS
14.44
11.06
11.31
9.20
13.48
10.48
11.85
10.13
UOB
12.33
12.22
12.82
11.28
11.03
11.55
11.06
9.43
OCBC
14.64
14.47
18.08
10.69
12.89
12.13
12.32
11.58
Sector
13.80
12.58
14.07
10.39
12.47
11.39
11.74
10.38
Source: Company reports and J.P. Morgan estimates.
6
Asia Pacific Equity Research 16 July 2015
Harsh Wardhan Modi (65) 6882- 2450 [email protected]
DBS Group Holdings (DBS) We expect DBS to report 2QFY15 net income of S$1,009mn, up 8% y/y and down 11% q/q. This is driven by a decline in Non-II (-25%q/q) and higher provisioning (+16% q/q) partially offset by an increase in net interest income (+8% q/q) due to NIM expansion. A Fed rate hike would be a key catalyst for the bank. Lack of cost discipline and higher-than-expected credit costs pose downside risks. Table 12: DBS: 2Q15 earnings preview PROFIT AND LOSS
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15E
YoY
QoQ
Interest Income
2,129
2,218
2,266
2,335
2,380
2,574
16%
8% 8%
Interest Expense
(641)
(661)
(664)
(661)
(690)
(744)
13%
Net Interest Income
1,488
1,557
1,602
1,674
1,690
1,831
18%
8%
Non-Interest Income
963
756
912
666
1,046
789
4%
-25%
Net Fee income
510
503
555
459
560
549
9%
-2%
Trading income
362
176
271
92
356
150
-15%
-58%
Other operating income
91
77
86
115
130
90
17%
-31%
2,451
2,313
2,514
2,340
2,736
2,620
13%
-4%
(1,041)
(1,054)
(1,109)
(1,126)
(1,181)
(1,193)
13%
1%
PPOP
1,410
1,259
1,405
1,214
1,555
1,427
13%
-8%
Loan loss provisions
(151)
(128)
(177)
(182)
(181)
(210)
64%
16%
Operating Revenue Operating Costs
Other income
13
12
6
9
4
10
-17%
150%
Pre-Tax
1,272
1,143
1,234
1,012
1,378
1,227
7%
-11%
Tax
(199)
(180)
(193)
(141)
(215)
(191)
6%
-11%
Net income
1,073
963
1,041
871
1,163
1,035
8%
-11%
(40)
(33)
(33)
(33)
(30)
(27)
-19%
-11%
1,033
930
1,008
838
1,133
1,009
8%
-11%
MI and EO Core Attributable profit Common Equity
34,764
35,355
35,947
36,905
38,386
38,597
9%
1%
Gross Loans
256,744
260,758
265,204
279,154
284,498
285,197
9%
0%
Net Loans
253,229
257,355
261,681
275,588
280,808
281,297
9%
0%
Deposits
301,490
299,399
304,982
317,173
324,480
326,775
9%
1%
NPL
2,622
2,317
2,425
2,419
2,503
2,646
14%
6%
LLR
3,515
3,403
3,523
3,566
3,690
3,900
15%
6% Change in bps
NIM
1.65%
1.67%
1.68%
1.71%
1.69%
1.76%
9
7
CIR
42.5%
45.6%
44.1%
48.1%
43.2%
45.5%
(3)
237
LDR
85.2%
87.1%
87.0%
88.0%
87.7%
87.3%
18
(40)
CASA ratio
56.2%
55.7%
55.4%
56.9%
57.9%
58.9%
315
103
24
20
27
27
26
29
10
4
NPL Ratio
1.02%
0.89%
0.91%
0.87%
0.88%
0.93%
4
5
Coverage Ratio
134%
147%
145%
147%
147%
147%
55
(0)
Fully phased in CET1
11.8%
12.2%
12.2%
11.9%
12.3%
12.3%
9
2
Tier1
13.1%
13.5%
13.4%
13.1%
13.4%
13.4%
(4)
1
CAR
15.3%
15.7%
15.6%
15.3%
15.3%
15.3%
(42)
(3)
Credit Costs (bps)
Source: Company reports and J.P. Morgan estimates.
7
Asia Pacific Equity Research 16 July 2015
Harsh Wardhan Modi (65) 6882- 2450 [email protected]
United Overseas Bank (UOB) We expect UOB to report 2QFY15 net income of S$868 mn, up 8% q/q and 23% y/y. This is driven by an increase in net interest income (+5% q/q) and Non-II (+4% q/q) partially offset by higher loan provisioning (+33% q/q). The Bank’s real estate and SME exposure is a cause for concern. We expect limited margin expansion going forward. Table 13: UOB: 2Q15 earnings preview PROFIT AND LOSS
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15E
YoY
QoQ
Interest Income
1,744
1,761
1,811
1,874
1,902
2,011
14%
6%
Interest Expense
(635)
(637)
(656)
(704)
(702)
(754)
18%
7%
Net Interest Income
1,109
1,124
1,155
1,170
1,200
1,257
12%
5%
Non-Interest Income
642
660
816
681
755
787
19%
4%
Net Fee income
414
410
475
450
453
462
13%
2%
Trading income
149
150
258
160
225
225
50%
0%
79
100
83
71
77
100
0%
30%
Operating Revenue
1,751
1,784
1,971
1,851
1,955
2,044
15%
5%
Operating Costs
(755)
(787)
(799)
(805)
(852)
(858)
9%
1%
996
997
1,172
1,046
1,103
1,187
19%
8%
(122)
(152)
(147)
(151)
(135)
(180)
18%
33%
(35)
2
(16)
(14)
(34)
-
-100%
-100%
43
26
37
43
4
50
92%
1150%
Other operating income
PPOP Loan loss provisions Other provisions Other income Pre-Tax
882
873
1,046
924
938
1,057
21%
13%
Tax
(89)
(161)
(176)
(135)
(133)
(185)
15%
39%
Profit before minorities
793
712
870
789
805
872
22%
8%
Core profit
788
707
867
787
801
868
23%
8%
Reported profit
788
807
867
787
801
868
8%
8%
Common Equity
25,073
25,910
26,431
27,389
28,650
29,490
14%
3%
Gross Loans
188,597
193,140
195,943
199,343
203,324
207,934
8%
2%
Net Loans
184,982
189,758
192,228
195,614
199,434
204,073
8%
2%
Deposits
216,618
216,128
224,364
233,750
239,410
242,904
12%
1%
NPL
2,077
2,309
2,289
2,358
2,442
2,564
11%
5%
LLR
3,327
3,445
3,360
3,440
3,589
3,561
3%
-1%
NIM
1.73%
1.71%
1.71%
1.69%
1.75%
1.76%
6
1
CIR
43.1%
44.1%
40.5%
43.5%
43.6%
42.0%
(216)
(163)
LDR
87.1%
89.4%
87.3%
85.3%
84.9%
85.6%
(376)
68
CASA ratio
43.5%
41.5%
41.0%
41.6%
41.2%
40.7%
(84)
(53)
26
32
30
31
27
35
3
8
1.10%
1.20%
1.17%
1.18%
1.20%
1.23%
4
3
Change in bps
Credit Costs (bps) NPL Ratio Coverage Ratio
160%
149%
147%
146%
147%
139%
(1,033)
(810)
Fully phased in CET1
12.6%
12.6%
12.7%
12.7%
12.9%
13.2%
59
27
CET1
14.0%
13.9%
14.0%
13.9%
14.3%
14.5%
56
25
CAR
17.7%
17.8%
17.0%
16.9%
17.1%
17.3%
(49)
20
Source: Company reports and J.P. Morgan estimates.
8
Asia Pacific Equity Research 16 July 2015
Harsh Wardhan Modi (65) 6882- 2450 [email protected]
OCBC Bank We expect OCBC to deliver net income of S$958mn, up 4%y/y, down 3%q/q, despite growth in NII (+4%q/q). Deterioration in AQ (NPL +6%q/q and LLR +4% q/q) and higher operating cost (+2% q/q) are expected to bring down the overall profits. We expect the bank to reach an 11.5%-12% CET1 over the next 5-7 quarters. Also, a pick-up in HK treasury sales and higher revenues at BoS / brokerage given recent equity volumes in Asia poses upside risks. Table 14: OCBC: 2Q15 earnings preview
PROFIT AND LOSS
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15E
YoY
QoQ
Interest Income
1,707
1,776
2,025
2,099
2,108
2,201
24%
4%
Interest Expense
(620)
(650)
(779)
(822)
(859)
(898)
38%
5%
Net Interest Income
1,087
1,126
1,246
1,277
1,249
1,303
16%
4%
Non-Interest Income
768
850
801
763
859
870
2%
1%
Net Fee income
353
353
406
383
395
415
17%
5%
Trading income
151
146
117
84
166
142
-3%
-14%
Other operating income
264
351
278
296
298
313
-11%
5%
Operating Revenue
1,855
1,976
2,047
2,040
2,108
2,173
10%
3%
Operating Costs
(706)
(760)
(870)
(922)
(873)
(888)
17%
2%
PPOP
1,149
1,216
1,177
1,118
1,235
1,285
6%
4%
Loan loss provisions
(40)
(78)
(97)
(144)
(65)
(116)
49%
79%
Other provisions
(15)
(2)
(14)
(41)
(23)
(20)
900%
-13%
17
18
14
63
89
60
233%
-33%
Pre-Tax
1,111
1,154
1,080
996
1,236
1,208
5%
-2%
Tax
(185)
(172)
(184)
(146)
(185)
(193)
12%
5%
MI and EO
(59)
(61)
(55)
(59)
(58)
(57)
-7%
-2%
Net attributable profit
899
921
1,232
790
993
958
4%
-3%
Other income
Common Equity
24,647
25,497
28,375
29,701
31,043
31,221
22%
1%
Gross Loans
175,245
177,415
204,854
209,822
210,156
211,234
19%
1%
Net Loans
173,456
175,572
202,678
207,535
207,826
208,810
19%
0%
Deposits
199,403
201,297
237,172
245,519
250,309
250,762
25%
0%
NPL
1,191
1,172
1,338
1,279
1,346
1,429
22%
6%
LLR
1,789
1,843
2,176
2,287
2,330
2,424
32%
4% Change in bps
NIM
1.70%
1.70%
1.67%
1.67%
1.62%
1.67%
(4)
5
CIR
38.1%
38.5%
42.5%
45.2%
41.4%
40.9%
242
(54)
LDR
87.9%
88.1%
86.4%
85.5%
84.0%
84.2%
(390)
28
CASA ratio
47.3%
47.2%
44.5%
44.6%
45.5%
45.5%
(163)
6
9
18
20
28
12
22
4
10
NPL Ratio
0.68%
0.66%
0.65%
0.61%
0.64%
0.68%
2
4
Coverage Ratio
150%
157%
163%
179%
173%
170%
1,238
(347)
Fully phased in CET1
11.0%
11.3%
10.1%
10.6%
11%
11.2%
(12)
48
Tier 1
14.5%
14.8%
13.2%
13.8%
13.5%
13.8%
(97)
27
CAR
15.7%
17.4%
15.6%
15.9%
15.5%
15.8%
(164)
25
Credit Costs (bps)
Source: Company reports and J.P. Morgan estimates.
9
Harsh Wardhan Modi (65) 6882- 2450 [email protected]
Asia Pacific Equity Research 16 July 2015
Indonesia Banks The shifts in sector returns are driven primarily by increasing margins, higher Non-II partially offset by increasing credit cost. This will result in sequential improvement in ROE from 1Q15-4Q15. The credit demand is expected to remain weak and deteriorating asset quality is likely to pose significant risk for the banks. Table 15: Indonesia Industry DuPont Du Pont Item
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15E
3Q15E
4Q15E
NIM
7.23
7.01
7.14
7.06
6.87
6.82
6.91
7.04
NII/Assets
6.45
6.41
6.33
6.35
6.14
6.13
6.23
6.37
Non II/Assets
2.02
2.09
2.06
2.15
1.98
2.10
2.19
2.34
Rev/Assets
8.51
8.32
8.21
8.30
8.13
8.19
8.32
8.49
Costs/Assets
4.02
4.02
4.06
4.15
3.97
4.00
4.10
4.16
Costs/income
46.92
47.00
47.95
48.50
48.61
48.28
48.32
47.60
Opt Profits/Assets
4.46
4.48
4.33
4.35
4.15
4.23
4.33
4.55
Credit Cost
1.32
1.58
1.54
1.22
1.45
1.83
1.44
1.58
ROA
2.77
2.68
2.70
2.62
2.50
2.40
2.68
2.75
A/E
7.46
7.37
7.40
7.38
7.09
6.93
6.98
6.94
ROE
21.05
20.20
20.37
19.83
18.79
17.50
18.81
19.21
Source: Company reports and J.P. Morgan estimates.
Table 16: NIM (%)
We expect the margins to expand marginally
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15E
3Q15E
4Q15E
BBCA
6.45
6.46
6.49
6.53
6.53
6.39
6.39
6.49
BBNI
6.08
5.82
6.49
6.41
6.52
6.49
6.48
6.50
BBRI
9.06
8.80
8.48
7.70
7.57
7.67
7.99
8.19
BMRI
5.94
5.84
5.83
6.15
5.41
5.51
5.62
5.70
BDMN
8.62
8.14
8.41
8.51
8.31
8.03
8.08
8.33
Sector
7.23
7.01
7.14
7.06
6.87
6.82
6.91
7.04
Source: Company reports and J.P. Morgan estimates.
Table 17: Non-II/Total Assets (%)
We think that non-II has bottomed out last year and expect the metric to improve marginally going forward
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15E
3Q15E
4Q15E
BBCA
1.70
1.64
1.73
1.83
1.78
1.84
1.86
1.82
BNI
2.37
2.37
2.30
2.80
2.47
2.54
2.56
2.82
BBRI
1.04
1.45
1.68
1.37
1.38
1.39
1.41
1.51
BMRI
2.25
2.37
2.22
2.36
2.12
2.24
2.32
2.44
BDMN
2.73
2.61
2.35
2.40
2.17
2.47
2.80
3.10
Sector
2.02
2.09
2.06
2.15
1.98
2.10
2.19
2.34
Source: Company reports and J.P. Morgan estimates.
10
Harsh Wardhan Modi (65) 6882- 2450 [email protected]
Asia Pacific Equity Research 16 July 2015
Table 18: Revenue/Total Assets
Improving non-II and NIM should result in marginal improvement in revenue to total asset
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15E
3Q15E
4Q15E
BBCA
7.77
7.57
7.78
7.94
7.87
7.85
7.84
7.88
BBNI
8.12
7.63
7.83
8.51
8.49
8.30
8.42
8.65
BBRI
9.11
9.29
8.93
8.02
8.08
8.22
8.33
8.50
BMRI
7.33
7.21
7.03
7.34
6.83
7.09
7.31
7.48
BDMN
10.21
9.90
9.47
9.68
9.39
9.48
9.70
9.92
Sector
8.51
8.32
8.21
8.30
8.13
8.19
8.32
8.49
Source: Company reports and J.P. Morgan estimates.
Table 19: Cost to Assets %
Expect cost to asset ratio to increase for all banks, except BBCA
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15E
3Q15E
4Q15E
BBCA
3.76
3.42
3.17
3.69
4.14
3.76
3.55
3.86
BBNI
3.51
3.82
3.69
4.60
3.96
4.13
4.27
4.29
BBRI
3.94
3.80
4.39
3.83
3.67
3.73
4.11
3.83
BMRI
3.10
3.28
3.41
3.27
3.01
3.13
3.26
3.48
BDMN
5.77
5.76
5.62
5.36
5.08
5.26
5.29
5.35
Sector
4.02
4.02
4.06
4.15
3.97
4.00
4.10
4.16
Source: Company reports and J.P. Morgan estimates.
Table 20: Operating Profit/Total Assets (%)
A steady increase in operating profit/total assets is expected on account of improving non-II
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15E
3Q15E
4Q15E
BBCA
4.05
4.30
4.71
4.36
3.76
4.13
4.38
4.13
BBNI
4.44
4.16
4.14
4.00
4.43
4.25
4.24
4.63
BBRI
5.09
5.69
4.95
4.71
4.43
4.43
4.36
4.93
BMRI
4.21
4.10
3.77
4.32
3.87
3.97
4.09
4.14
BDMN
4.49
4.13
4.08
4.35
4.26
4.36
4.56
4.89
Sector
4.46
4.48
4.33
4.35
4.15
4.23
4.33
4.55
Source: Company reports and J.P. Morgan estimates.
Table 21: Credit costs (%)
Credit costs are expected to rise on account of asset quality concerns
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15E
3Q15E
4Q15E
BBCA
0.31
0.40
0.74
0.60
(0.01)
0.51
0.52
0.52
BBNI
1.98
1.40
1.78
0.47
1.72
2.82
1.02
1.06
BBRI
0.98
1.75
1.51
0.63
1.25
1.59
1.58
1.61
BMRI
0.81
1.33
0.69
1.42
1.03
1.44
1.24
1.41
BDMN
2.55
2.99
3.00
2.96
3.27
2.82
2.85
3.31
Sector
1.32
1.58
1.54
1.22
1.45
1.83
1.44
1.58
Source: Company reports and J.P. Morgan estimates.
11
Harsh Wardhan Modi (65) 6882- 2450 [email protected]
Asia Pacific Equity Research 16 July 2015
Table 22: ROA (%)
Growth in non-II is expected to boost RoA numbers
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15E
3Q15E
4Q15E
BBCA
2.94
3.27
3.28
3.15
2.92
3.03
3.23
3.06
BBNI
2.52
2.61
2.62
3.08
2.74
1.99
2.91
3.28
BBRI
3.82
3.69
3.80
3.23
3.06
2.96
2.91
3.06
BMRI
2.69
2.50
2.49
2.62
2.39
2.30
2.47
2.58
BDMN
1.89
1.32
1.30
1.02
1.41
1.72
1.86
1.76
Sector
2.77
2.68
2.70
2.62
2.50
2.40
2.68
2.75
Source: Company reports and J.P. Morgan estimates.
Table 23: Asset/Equity
Except for BDMN, the asset to equity is likely to decrease in the coming quarters
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15E
3Q15E
4Q15E
BBCA
7.58
7.43
7.32
7.16
7.05
6.83
6.59
6.48
BBNI
7.68
7.61
7.78
7.47
7.20
7.01
6.86
6.80
BBRI
7.86
7.69
7.66
7.98
8.31
8.09
7.70
7.57
BMRI
8.36
8.32
8.26
8.28
8.37
8.23
7.91
7.79
BDMN
5.84
5.83
5.97
6.01
4.52
4.48
5.82
6.04
Sector
7.46
7.37
7.40
7.38
7.09
6.93
6.98
6.94
Source: Company reports and J.P. Morgan estimates.
Table 24: ROE (%)
We expect RoE values to trend upwards on the back of improving non-II
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15E
3Q15E
4Q15E
BBCA
22.26
24.27
24.01
22.55
20.61
20.69
21.25
19.81
BBNI
19.38
19.87
20.40
22.97
19.69
13.92
19.96
22.34
BBRI
30.03
28.37
29.12
25.78
25.40
23.95
22.41
23.16
BMRI
22.53
20.75
20.58
21.71
19.97
18.93
19.58
20.07
BDMN
11.04
7.72
7.75
6.14
8.29
9.98
10.84
10.64
Sector
21.05
20.20
20.37
19.83
18.79
17.50
18.81
19.21
Source: Company reports and J.P. Morgan estimates.
12
Asia Pacific Equity Research 16 July 2015
Harsh Wardhan Modi (65) 6882- 2450 [email protected]
PT Bank Mandiri Tbk. (BMRI) We expect BMRI to deliver net income of Rp5,004bn, up 7%y/y, down 3% q/q. AQ is expected to deteriorate further (NPL +9% q/q) and margins to stay flat. The increase in NII driven by volume growth (loan growth +2% q/q) is likely to be offset by higher operating costs and loan provisioning. We think a pick-up in capex, both by private and SoE corporates should benefit Mandiri the most in the sector. Table 25: BMRI: 2Q15 earnings preview PROFIT AND LOSS
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15E
YoY
QoQ
Interest Income
14,313
14,978
15,984
17,363
17,117
17,244
15%
1%
Interest Expense
(5,064)
(5,603)
(6,303)
(6,536)
(6,853)
(6,666)
19%
-3%
Net Interest Income
9,249
9,375
9,681
10,827
10,264
10,578
13%
3%
Non-Interest Income
4,112
4,420
4,344
4,873
4,558
4,877
10%
7%
Net Fee income
2,719
2,904
2,988
3,241
3,040
3,284
13%
8%
Trading income
562
421
475
510
618
568
35%
-8%
Other operating income
831
1,095
880
1,122
900
1,025
-6%
14%
Operating Revenue
13,361
13,795
14,025
15,700
14,822
15,456
12%
4%
Operating Costs
(5,669)
(6,136)
(6,662)
(6,766)
(6,483)
(6,807)
11%
5%
PPOP
7,693
7,659
7,363
8,934
8,339
8,648
13%
4%
Loan loss provisions
(952)
(1,593)
(853)
(1,837)
(1,361)
(1,935)
21%
42%
Other provisions
(277)
23
(91)
(91)
(186)
(100)
-531%
-46%
(4)
10
15
10
2
2
-75%
0%
6,459
6,098
6,434
7,016
6,794
6,616
8%
-3%
Other income Pre-Tax Tax
(1,336)
(1,256)
(1,361)
(1,400)
(1,424)
(1,387)
10%
-3%
MI and EO
(198)
(182)
(205)
(198)
(232)
(225)
24%
-3%
Core Attributable profit
4,925
4,661
4,868
5,418
5,138
5,004
7%
-3%
Common Equity
87,456
92,218
97,045
102,658
103,211
108,214
17%
5%
Gross Loans
469,750
485,124
505,699
529,190
532,078
543,758
12%
2%
Net Loans
453,282
467,845
488,596
511,483
514,066
524,890
12%
2%
Deposits
531,611
555,920
590,890
636,382
628,712
633,952
14%
1%
NPL
9,724
10,818
10,923
11,378
12,078
13,142
21%
9%
LLR
16,469
17,279
17,103
17,707
18,012
18,868
9%
5% Change in bps
NIM
5.94%
5.84%
5.83%
6.15%
5.41%
5.51%
(32)
CIR
42.4%
44.5%
47.5%
43.1%
43.7%
44.0%
(44)
30
LDR
88.4%
87.3%
85.6%
83.2%
84.6%
85.8%
(149)
114
CASA ratio
63.0%
62.2%
61.2%
59.8%
59.2%
59.1%
(306)
(7)
81
133
69
142
103
144
10
41
NPL Ratio
2.07%
2.23%
2.16%
2.15%
2.27%
2.42%
19
15
Coverage Ratio
169%
160%
157%
156%
149%
144%
(1,616)
(556)
Credit Costs (bps)
11
Source: Company reports and J.P. Morgan estimates.
13
Harsh Wardhan Modi (65) 6882- 2450 [email protected]
Asia Pacific Equity Research 16 July 2015
Bank Rakyat Indonesia (BBRI) We expect Rakyat to report net income of Rp 5,921bn, up 2%y/y, down 4%q/q. While NII and Non-II are expected to stay flat, the overall profits would decline due to high loan provisions (+28% q/q) and marginal increase in operating cost (+1% q/q). Higher-than-expected credit costs in the SME book is the key near-term risk for the stock. Table 26: BBRI: 2Q15 earnings preview PROFIT AND LOSS
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15E
YoY
QoQ
Interest Income
17,111
17,946
19,412
20,701
20,856
20,726
15%
-1%
Interest Expense
(4,698)
(5,290)
(6,491)
(7,202)
(7,359)
(7,180)
36%
-2%
Net Interest Income
12,413
12,656
12,921
13,499
13,497
13,547
7%
0%
Non-Interest Income
1,609
2,282
2,824
2,584
2,777
2,787
22%
0%
Net Fee income
1,249
1,442
1,564
1,852
1,752
1,927
34%
10%
Trading income
(204)
336
222
12
218
160
-52%
-27%
Other operating income
563
504
1,039
720
807
700
39%
-13%
Operating Revenue
14,022
14,939
15,745
16,084
16,274
16,334
9%
0%
Operating Costs
(6,115)
(5,984)
(7,398)
(7,208)
(7,369)
(7,471)
25%
1%
7,906
8,955
8,347
8,875
8,905
8,862
-1%
0%
(1,100)
(2,033)
(1,807)
(779)
(1,565)
(2,006)
-1%
28%
PPOP Loan loss provisions Other income Pre-Tax Tax MI and EO Core Attributable profit Common Equity
605
505
1,175
209
291
550
9%
89%
7,412
7,427
7,715
8,305
7,631
7,406
0%
-3%
(1,474)
(1,615)
(1,301)
(2,215)
(1,484)
(1,481)
-8%
0%
(3)
(3)
(2)
(4)
(4)
(4)
40%
0%
5,935
5,809
6,413
6,085
6,143
5,921
2%
-4%
78,923
84,880
91,286
97,560
95,918
101,839
20%
6%
Gross Loans
449,953
477,092
483,072
510,428
493,088
517,903
9%
5%
Net Loans
434,422
460,577
466,311
494,541
476,962
501,162
9%
5%
Deposits
487,669
508,142
564,678
622,322
610,937
613,970
21%
0%
NPL
8,009
9,399
9,130
8,626
10,700
10,947
16%
2%
LLR
15,531
16,515
16,761
15,886
16,127
16,742
1%
4%
Change in bps NIM
9.06%
8.80%
8.48%
7.70%
7.57%
7.67%
CIR
43.6%
40.1%
47.0%
44.8%
45.3%
45.7%
569
46
LDR
92.3%
93.9%
85.5%
82.0%
80.7%
84.4%
(954)
364
CASA ratio
55.7%
55.3%
51.6%
51.8%
49.9%
51.2%
(409)
124
98
175
151
63
125
159
(17)
34
NPL Ratio
1.78%
1.97%
1.89%
1.69%
2.17%
2.11%
14
(6)
Coverage Ratio
194%
176%
184%
184%
151%
153%
(2,278)
222
Credit Costs (bps)
Source: Company reports and J.P. Morgan estimates.
14
(113)
10
Asia Pacific Equity Research 16 July 2015
Harsh Wardhan Modi (65) 6882- 2450 [email protected]
Bank Negara Indonesia Persero (BBNI) We expect BNI's earnings to decline drastically in 2Q to Rp 2041bn (down 20%y/y, down 28% q/q) mainly on account of a decline in NII, higher operating costs (+4% q/q) and higher loan provisions (+62% q/q). We are wary of the AQ deterioration (NPL +23% q/q), which will result in higher credit costs (109 bps). Table 27: BBNI: 2Q15 earnings preview
PROFIT AND LOSS
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15E
YoY
QoQ
Interest Income
7,527
8,146
8,741
8,951
8,887
8,727
7%
-2%
Interest Expense
(2,237)
(2,681)
(3,101)
(2,969)
(2,790)
(2,724)
2%
-2%
Net Interest Income
5,289
5,464
5,640
5,982
6,096
6,003
10%
-2%
Non-Interest Income
3%
2,248
2,312
2,350
2,882
2,543
2,612
13%
Net Fee income
996
1,152
1,057
1,276
1,158
1,262
10%
9%
Trading income
317
205
395
294
215
300
46%
39%
Other operating income
935
954
897
1,311
1,170
1,050
10%
-10%
7,537
7,776
7,990
8,864
8,639
8,615
11%
0%
(3,327)
(3,724)
(3,765)
(4,743)
(4,078)
(4,243)
14%
4%
4,210
4,052
4,225
4,121
4,562
4,372
8%
-4%
(1,229)
(885)
(1,170)
(323)
(1,178)
(1,906)
115%
62%
Operating Revenue Operating Costs PPOP Loan loss provisions Other income
34
115
264
144
240
120
4%
-50%
Pre-Tax
3,011
3,196
3,386
3,931
3,560
2,586
-19%
-27%
Tax
(615)
(644)
(692)
(743)
(725)
(527)
-18%
-27%
MI and EO Core Attributable profit Common Equity
(3)
(8)
(19)
(17)
(18)
(18)
119%
0%
2,393
2,543
2,675
3,171
2,817
2,041
-20%
-28%
51,097
51,310
53,611
56,815
57,652
59,663
16%
3%
Gross Loans
246,913
257,311
267,734
277,360
269,221
272,351
6%
1.2%
Net Loans
239,906
250,403
260,418
270,652
262,137
264,450
6%
0.9%
Deposits
273,966
314,197
308,327
313,893
305,752
310,575
-1%
1.6%
NPL
5,728
5,635
5,890
5,436
5,761
7,107
26%
23%
LLR
7,007
6,908
7,316
6,708
7,084
7,901
14%
12%
NIM
6.08%
5.82%
6.49%
6.41%
6.52%
6.49%
67
(3)
CIR
44.1%
47.9%
47.1%
53.5%
47.2%
49.3%
136
205
LDR
90.1%
81.9%
86.8%
88.4%
88.1%
87.7%
580
(36)
CASA ratio
63.7%
59.7%
60.6%
63.0%
61.2%
61.8%
207
60
198
140
178
47
172
282
141
109
NPL Ratio
2.32%
2.19%
2.20%
1.96%
2.14%
2.61%
42
47
Coverage Ratio
122%
123%
124%
123%
123%
111%
(1,143)
(1,179)
Change in bps
Credit Costs (bps)
Source: Company reports and J.P. Morgan estimates.
15
Asia Pacific Equity Research 16 July 2015
Harsh Wardhan Modi (65) 6882- 2450 [email protected]
Bank Danamon (BDMN) We expect BDMN to deliver net income of Rp846bn (up 38% y/y, up 23% y/y). NII is likely to increase marginally (+1% q/q) on the back of sluggish volume growth (loans +1% q/q), while Non-II could see a spike in 2Q (+15% q/q). Due to the low probability of a capital call (17.9% T1) and limited risks to book despite weak credit environment (PPOP RoA of 4.3%), we see limited absolute downside for the stock. Table 28: BDMN: 2Q15 earnings preview
PROFIT AND LOSS
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15E
YoY
QoQ
Interest Income
5,613
5,682
5,794
5,903
5,745
5,696
0%
-1%
Interest Expense
(2,131)
(2,306)
(2,308)
(2,336)
(2,256)
(2,182)
-5%
-3%
Net Interest Income
3,482
3,376
3,486
3,566
3,489
3,513
4%
1%
Non-Interest Income
1,265
1,213
1,116
1,169
1,058
1,214
0%
15%
Net Fee income
667
689
668
680
613
674
-2%
10%
Trading income
(36)
2
(52)
4
40
40
2330%
0%
Other operating income
634
522
500
485
405
500
-4%
23%
Operating Revenue
4,747
4,589
4,602
4,736
4,548
4,728
3%
4%
(2,672)
(2,672)
(2,666)
(2,615)
(2,475)
(2,585)
-3%
4%
PPOP
2,075
1,917
1,936
2,121
2,073
2,143
12%
3%
Loan loss provisions
(853)
(1,022)
(1,033)
(1,014)
(1,106)
(948)
-7%
-14%
(17)
(29)
(22)
4
(26)
(15)
-49%
-42%
(6)
(29)
(40)
(129)
(14)
(30)
5%
118%
Operating Costs
Other provisions Other income Pre-Tax
1,200
837
841
981
927
1,150
37%
24%
Tax
(296)
(207)
(207)
(161)
(227)
(287)
39%
26%
MI and EO
(29)
(16)
(17)
(16)
(13)
(16)
-2%
24%
Core attributable profit
875
614
617
498
687
846
38%
23%
32,106
31,558
32,101
32,780
33,505
34,322
9%
2%
Gross Loans
134,166
138,845
136,797
137,111
133,829
135,400
-2%
1%
Net Loans
130,868
135,230
133,029
133,193
129,725
131,161
-3%
1%
Deposits
110,251
109,151
114,361
116,495
113,974
117,594
8%
3%
NPL
2,550
2,909
3,245
3,235
3,415
3,549
22%
4%
LLR
3,298
3,615
3,768
3,918
4,104
4,239
17%
3%
NIM
8.62%
8.14%
8.41%
8.51%
8.31%
8.03%
(12)
CIR
56.3%
58.2%
57.9%
55.2%
54.4%
54.7%
(355)
26
LDR
122%
127%
120%
118%
117%
115%
(1,206)
(228)
CASA ratio
40.4%
43.1%
42.1%
48.1%
44.9%
45.0%
196
9 (45)
Common Equity
Change in bps
Credit Costs (bps)
(29)
255
299
300
296
327
282
(18)
NPL Ratio
1.90%
2.10%
2.37%
2.36%
2.55%
2.62%
53
7
Coverage Ratio
129%
124%
116%
121%
120%
119%
(483)
(72)
Source: Company reports and J.P. Morgan estimates.
16
Asia Pacific Equity Research 16 July 2015
Harsh Wardhan Modi (65) 6882- 2450 [email protected]
Bank Central Asia (BCA) We expect BCA's net profit to increase marginally to Rp4238bn (up 1% y/y, up 4%q/q). With flat loan growth, the increase in profits will be driven by increase in trading income (+52% q/q) and decline in operating costs (-8% q/q). In our view, continued improvement in NIMs and higher-than-expected loan growth is an upside risk. Table 29: BCA: 2Q15 earnings preview PROFIT AND LOSS
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15E
YoY
QoQ
Interest Income
10,269
10,659
11,268
11,597
11,563
11,408
7%
-1%
Interest Expense
(2,640)
(2,861)
(3,115)
(3,128)
(3,063)
(2,946)
3%
-4%
Net Interest Income
7,629
7,798
8,153
8,469
8,500
8,462
9%
0%
Non-Interest Income
2,120
2,096
2,295
2,495
2,463
2,578
23%
5%
Net Fee income
1,657
1,832
1,814
1,986
1,937
2,053
12%
6%
Trading income
284
43
245
240
181
275
545%
52% -28%
Other operating income
179
221
237
269
346
250
13%
9,749
9,894
10,449
10,964
10,962
11,040
12%
1%
(4,693)
(4,388)
(4,203)
(5,030)
(5,744)
(5,261)
20%
-8%
PPOP
5,056
5,506
6,246
5,934
5,218
5,779
5%
11%
Loan loss provisions
Operating Revenue Operating Costs
(244)
(324)
(608)
(511)
9
(432)
33%
-5074%
Other provisions
(98)
(120)
(113)
(220)
(103)
(95)
-21%
-8%
Other income
(85)
226
(52)
147
-
100
-56%
-
Pre-Tax
4,629
5,289
5,472
5,351
5,124
5,352
1%
4%
Tax
(958)
(1,098)
(1,122)
(1,051)
(1,060)
(1,108)
1%
4%
MI and EO
(7)
(4)
(7)
(9)
(6)
(6)
67%
0%
3,665
4,187
4,344
4,291
4,057
4,238
1%
4%
67,826
70,191
74,553
77,683
79,775
84,095
20%
5%
Gross Loans
318,694
322,870
332,430
348,694
337,958
338,711
5%
0%
Net Loans
312,964
316,981
326,075
341,990
331,405
331,870
5%
0%
Deposits
408,471
423,023
433,852
450,155
447,440
454,132
7%
1%
NPL
1,498
1,614
2,194
2,067
2,231
2,389
48%
7%
LLR
5,730
5,889
6,355
6,704
6,553
6,841
16%
4%
NIM
6.45%
6.46%
6.49%
6.53%
6.53%
6.39%
(7)
(15)
CIR
48.1%
44.3%
40.2%
45.9%
52.4%
47.7%
331
(475)
LDR
78.0%
76.3%
76.6%
77.5%
75.5%
74.6%
(174)
(95)
CASA Ratio
77.4%
76.9%
75.9%
74.7%
74.8%
74.9%
(194)
12
31
40
74
60
(1)
51
11
52
NPL Ratio
0.47%
0.50%
0.66%
0.59%
0.66%
0.71%
21
5
Coverage Ratio
383%
365%
290%
324%
294%
286%
(7,840)
(741)
Core Attributable profit Common Equity
Change in bps
Credit Costs (bps)
Source: Company reports and J.P. Morgan estimates.
17
Harsh Wardhan Modi (65) 6882- 2450 [email protected]
Asia Pacific Equity Research 16 July 2015
Malaysia Banks Malaysia banks’ RoE are likely to trend down in 2Q and stay low within our estimates horizon as we expect industry credit cost start to normalize in 2Q with risk of NPL formation in this slowing domestic consumption and growth environment. NIM pressure to stay especially among the smaller banks; as industry ALR starts to trend lower and CoF remains alleviated. Possibility of capital call among the capital deficient banks (CIMB and HLBK) poses downside risk to its RoE. Table 30: Malaysia Industry DuPont Du Pont Item
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15E
3Q15E
4Q15E
NIM
2.36
2.28
2.31
2.22
2.07
2.10
2.10
2.12
NII/Assets
2.23
2.15
2.19
2.10
1.96
1.98
1.99
2.01
Non II/Assets
0.83
0.82
0.88
0.89
0.85
0.80
0.79
0.82
Rev/Assets
3.03
2.96
3.04
2.93
2.76
2.76
2.75
2.80
Costs/Assets
1.43
1.45
1.42
1.50
1.39
1.36
1.36
1.40
Costs/income
45.29
47.46
45.00
48.62
48.48
47.94
47.83
48.21
Opt Profits/Assets
1.64
1.53
1.65
1.49
1.41
1.41
1.41
1.43
Credit Cost
0.19
0.13
0.16
0.19
0.17
0.24
0.24
0.18
ROA
1.20
1.25
1.20
1.08
1.10
0.92
0.98
1.02
A/E
12.04
11.80
11.44
11.30
11.36
11.50
11.58
11.34
ROE
14.39
14.62
13.72
12.24
12.51
10.56
11.40
11.60
Source: Company reports and J.P. Morgan estimates.
Table 31: NIM (%) Larger banks are likely to see stable NIMs in 2Q such as PBK and MAY, while the smaller banks to continue facing margin pressures
Bank
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15E
3Q15E
4Q15E
HLBK
1.98
1.93
1.97
1.92
1.78
1.76
1.82
1.83
PBK
2.13
2.09
2.20
2.12
2.03
2.07
2.08
2.07
MAY
2.24
2.23
2.24
2.15
2.18
2.18
2.21
2.20
CIMB
2.80
2.86
2.80
2.82
2.62
2.52
2.47
2.53
AMM
2.91
2.44
2.53
2.35
1.94
2.19
2.20
2.22
RHBC
2.12
2.12
2.09
1.98
1.91
1.87
1.83
1.86
Sector
2.36
2.28
2.31
2.22
2.07
2.10
2.10
2.12
Source: Company reports and J.P. Morgan estimates.
Table 32: Non-II/Total Assets (%) Non-II to trend lower in 2Q in tandem with weak capital market
Bank
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15E
3Q15E
4Q15E
HLBK
0.39
0.53
0.43
0.46
0.52
0.50
0.50
0.51
PBK
0.59
0.60
0.59
0.59
0.60
0.56
0.54
0.54
MAY
0.87
0.87
0.82
1.17
0.89
0.91
0.81
0.93
CIMB
1.17
0.91
1.02
0.90
1.05
0.99
0.99
1.00
AMM
0.96
1.14
1.25
0.95
1.09
0.90
0.89
0.91
RHBC
1.03
0.86
1.19
1.24
0.91
0.94
0.99
1.01
Sector
0.83
0.82
0.88
0.89
0.85
0.80
0.79
0.82
Source: Company reports and J.P. Morgan estimates.
18
Harsh Wardhan Modi (65) 6882- 2450 [email protected]
Asia Pacific Equity Research 16 July 2015
Table 33: Revenue/Total Assets (%) Marginal improvement in NII is likely to be offset by the weaker non-II, hence we expect to see flat revenue/total asset
Bank
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15E
3Q15E
4Q15E
HLBK
2.28
2.36
2.28
2.31
2.20
2.18
2.23
2.25
PBK
2.64
2.59
2.72
2.62
2.56
2.56
2.55
2.54
MAY
2.95
2.98
2.88
3.14
2.91
2.96
2.88
2.99
CIMB
3.72
3.53
3.59
3.41
3.36
3.29
3.22
3.31
AMM
3.63
3.50
3.61
3.06
2.84
2.89
2.91
2.94
RHBC
2.98
2.81
3.15
3.05
2.68
2.70
2.70
2.75
Sector
3.03
2.96
3.04
2.93
2.76
2.76
2.75
2.80
Source: Company reports and J.P. Morgan estimates.
Table 34: Cost/Total Assets (%) Cost efficiencies is one of the banks key focus for the year to bolster the softer earnings momentum
Bank
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15E
3Q15E
4Q15E
HLBK
0.99
1.11
0.98
1.04
1.01
1.03
1.02
1.03
PBK
0.85
0.84
0.79
0.75
0.80
0.75
0.75
0.75
MAY
1.40
1.34
1.44
1.61
1.42
1.45
1.42
1.43
CIMB
2.14
2.10
2.09
2.22
2.01
1.96
1.90
1.94
AMM
1.54
1.72
1.58
1.55
1.65
1.49
1.52
1.54
RHBC
1.63
1.58
1.62
1.84
1.48
1.50
1.54
1.68
Sector
1.43
1.45
1.42
1.50
1.39
1.36
1.36
1.40
Source: Company reports and J.P. Morgan estimates.
Table 35: Operating profits/Total Assets (%) Generally weaker PPOP RoA on individual bank level
Bank
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15E
3Q15E
4Q15E
HLBK
1.30
1.28
1.34
1.26
1.21
1.16
1.23
1.23
PBK
1.82
1.80
1.95
1.92
1.79
1.82
1.83
1.82
MAY
1.59
1.65
1.51
1.60
1.54
1.53
1.48
1.59
CIMB
1.62
1.46
1.52
1.28
1.45
1.34
1.36
1.41
AMM
2.11
1.67
2.02
1.59
1.24
1.42
1.41
1.42
RHBC
1.40
1.29
1.55
1.29
1.24
1.21
1.17
1.11
Sector
1.64
1.53
1.65
1.49
1.41
1.41
1.41
1.43
Source: Company reports and J.P. Morgan estimates.
Table 36: Credit cost The low credit cost in the past three quarters has been masked by writeback/recovery. We expect credit cost to normalize in 2Q
Bank
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15E
3Q15E
4Q15E
HLBK
0.10
0.09
-0.06
-0.20
-0.02
0.07
0.07
0.07
PBK
0.15
0.11
0.08
0.10
0.12
0.14
0.18
0.20
MAY
0.23
0.17
0.07
-0.03
0.24
0.27
0.27
0.23
CIMB
0.19
0.24
0.56
1.43
0.80
0.69
0.47
0.34
AMM
0.29
0.09
0.02
-0.26
-0.27
0.05
0.13
0.09
RHBC
0.17
0.05
0.28
0.12
0.14
0.22
0.30
0.18
Sector
0.19
0.13
0.16
0.19
0.17
0.24
0.24
0.18
Source: Company reports and J.P. Morgan estimates.
19
Harsh Wardhan Modi (65) 6882- 2450 [email protected]
Asia Pacific Equity Research 16 July 2015
Table 37: RoA (%) We expect ROA to decline in 2Q , on the back of sequentially weaker earnings. CIMB’s exceptionally low RoA was due to one-off MSS cost of M$443mn
Bank
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15E
3Q15E
4Q15E
HLBK
1.21
1.28
1.26
1.24
1.16
1.03
1.10
1.12
PBK
1.32
1.33
1.46
1.48
1.34
1.33
1.31
1.31
MAY
1.08
1.10
1.08
1.31
1.05
1.03
0.99
1.08
CIMB
1.14
0.99
0.92
0.20
0.92
0.30
0.83
0.91
AMM
1.50
1.67
1.43
1.31
1.29
1.00
0.95
0.98
RHBC
0.93
1.11
1.05
0.91
0.86
0.79
0.72
0.73
Sector
1.20
1.25
1.20
1.08
1.10
0.92
0.98
1.02
Source: Company reports and J.P. Morgan estimates.
Table 38: Asset/Equity (%) Asset/equity to improve except for AMM
Bank
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15E
3Q15E
4Q15E
HLBK
11.96
11.80
11.75
11.67
11.55
11.50
11.37
11.30
PBK
15.15
15.21
13.59
12.36
12.46
12.60
12.50
12.29
MAY
12.08
11.96
12.09
12.16
11.97
12.02
12.04
11.82
CIMB
11.41
10.76
10.75
10.88
11.25
11.53
11.65
11.55
AMM
10.23
9.53
8.99
9.18
9.32
9.22
9.26
9.30
RHBC
11.44
11.52
11.50
11.55
11.61
12.11
12.65
11.76
Sector
12.04
11.80
11.44
11.30
11.36
11.50
11.58
11.34
Source: Company reports and J.P. Morgan estimates.
Table 39: RoE (%) We expect RoE to trend lower in 2Q, primarily due to higher credit cost assumption
Bank
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15E
3Q15E
4Q15E
HLBK
14.43
15.06
14.76
14.50
13.44
11.88
12.51
12.63
PBK
19.94
20.21
19.78
18.31
16.70
16.78
16.39
16.02
MAY
13.09
13.20
13.05
15.99
12.62
12.40
11.92
12.72
CIMB
12.89
10.61
9.78
2.15
10.33
3.50
9.57
10.45
AMM
15.35
15.91
12.89
12.04
12.01
9.22
8.81
9.11
RHBC
10.63
12.74
12.08
10.48
9.95
9.61
9.17
8.64
Sector
14.39
14.62
13.72
12.24
12.51
10.56
11.40
11.60
Source: Company reports and J.P. Morgan estimates.
20
Asia Pacific Equity Research 16 July 2015
Harsh Wardhan Modi (65) 6882- 2450 [email protected]
AMMB Holdings We expect sequential improvement in PPOP (+17% q/q) from better cost control and higher net interest income. However, net earnings are likely to be 21% weaker, primarily coming from M$11mn of provisions (5bps of credit cost (ann.)) as asset quality is expected to deteriorate. To recap, AMM has a huge amount of writeback/recovery of M$116mn in 2HFY15. Hence, higher-than-expected provisions during the quarter pose downside risk to our estimates. Table 40: AMM: 2Q15 earnings preview PROFIT AND LOSS
4Q14
1Q15
2Q15
3Q15
4Q15
1Q16E
YoY
QoQ
Interest Income Interest Expense Net Interest Income Fee income Investment income Life Insurance Income Other operating income Non-Interest Income Total Revenues Costs PPOP Loan loss provisions Impairment Loss Associate Pre-Tax Tax Profit before minorities MI & EO Net profits Disposals/ Exceptionals Reported profits
1,679 (792) 887 193 23 71 20 317 1,203 (508) 696 (64) (0) 11 642 (109) 533 (21) 511 (17) 495
1,526 (803) 724 165 72 115 9 367 1,091 (553) 538 (21) (32) 1 486 (126) 360 (31) 329 208 537
1,559 (826) 733 166 66 117 37 387 1,120 (491) 629 (5) (7) 7 625 (141) 484 (35) 449 (4) 446
1,546 (852) 694 158 34 96 15 303 997 (492) 505 57 17 5 584 (143) 441 (29) 411 5 417
1,460 (869) 590 168 69 90 22 361 952 (544) 408 59 29 (11) 486 (118) 368 (31) 337 89 425
1,567 (887) 680 154 64 68 16 302 982 (503) 479 (11) 0 12 480 (113) 367 (30) 337 0 337
3% 10% -6% -7% -11% -41% 76% -18% -10% -9% -11% -48% -100% 1066% -1% -10% 2% -3% 2% -100% -37%
7% 2% 15% -8% -7% -25% -30% -16% 3% -7% 17% -118% -100% -213% -1% -5% 0% -3% 0% -100% -21%
14,094 89,289 87,171 89,699 1,662 2,118
14,827 87,602 85,623 86,937 1,642 1,979
14,814 86,561 84,742 85,346 1,546 1,819
14,897 87,479 85,732 89,993 1,649 1,748
15,507 87,823 86,174 92,130 1,573 1,649
15,845 88,595 86,935 93,418 1,643 1,660
7% 1% 2% 7% 0% -16%
2% 1% 1% 1% 4% 1%
2.91% 42.2% 97.2% 29 1.86% 127% 9.70% 11.13%
2.44% 50.7% 98.5% 9 1.87% 121% 9.98% 11.45%
2.53% 43.8% 99.3% 2 1.79% 118% 10.26% 11.74%
2.35% 49.4% 95.3% (26) 1.88% 106% 10.02% 11.46%
1.94% 57.1% 93.5% (27) 1.79% 105% 10.51% 11.78%
2.19% 51.3% 93.1% 5 1.85% 101% 10.92% 12.14%
Common Equity Gross Loans Net Loans Deposits NPL LLR
Change in bps NIM CIR LDR Credit Costs (bps) NPL Ratio Coverage Ratio CET1 Ratio Tier 1 Ratio
(25) 56 (543) (4) (2) (1,946) 94 69
25 (588) (48) 32 6 (382) 41 36
Source: Company reports and J.P. Morgan estimates.
21
Asia Pacific Equity Research 16 July 2015
Harsh Wardhan Modi (65) 6882- 2450 [email protected]
CIMB Group Holdings CIMB’s 2Q15E core net earnings (excluding one-off MSS cost of M$443mn) are likely to be flat q/q. We expect sequentially weaker PPOP (-4% q/q) from lower nonII as investment income is likely to be weak during the quarter. Asset quality in Niaga is expected to improve in 2Q after huge provisions in the last two quarters. Any further asset quality deterioration in Indonesia poses downside risk to our earnings estimates.
Table 41: CIMB: 2Q15 earnings preview PROFIT AND LOSS
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15E
YoY
QoQ
4,412 (1,978) 2,435 502 318 276 1,097 3,532 (2,011) 1,521 (111) (18) 33 1,425 (349) (15) 1,061 6 1,067
4,594 (2,058) 2,536 453 178 240 871 3,407 (2,008) 1,399 (147) (9) 38 1,281 (317) (14) 950 (0) 950
4,666 (2,140) 2,526 457 280 251 987 3,513 (2,034) 1,480 (344) (4) 33 1,164 (276) (13) 875 15 890
5,061 (2,441) 2,620 491 139 279 909 3,529 (2,239) 1,290 (919) (20) 19 370 (109) (25) 236 (36) 200
5,002 (2,444) 2,558 531 327 264 1,122 3,680 (2,138) 1,543 (534) 4 14 1,026 (233) (10) 782 202 984
5,091 (2,548) 2,543 528 289 275 1,092 3,636 (2,158) 1,478 (467) 0 20 1,031 (237) (15) 779 (443) 336
11% 24% 0% 17% 62% 14% 25% 7% 7% 6% 217% -100% -47% -20% -25% 6% -18% -65%
2% 4% -1% -1% -12% 4% -3% -1% 1% -4% -13% -100% 47% 0% 2% 47% 0% -319% -66%
Common Equity Gross Loans Net Loans Deposits NPL LLR
36,519 240,379 234,197 262,018 7,380 6,183
36,625 240,959 234,998 268,593 7,523 5,961
37,694 249,677 243,606 263,523 8,178 6,071
38,391 264,780 258,015 282,069 8,183 6,765
39,491 270,352 263,125 296,569 8,582 7,227
38,972 274,950 267,476 304,153 8,909 7,474
6% 14% 14% 13% 18% 25%
-1% 2% 2% 3% 4% 3%
NIM CIR LDR Credit Costs (bps) NPL Ratio Coverage Ratio CET1 Ratio Tier 1 Ratio
2.80% 56.9% 91.7% 19 3.07% 84% 9.60% 11.10%
2.86% 58.9% 89.7% 24 3.12% 79% 9.50% 11.00%
2.80% 57.9% 94.7% 56 3.28% 74% 9.70% 11.20%
2.82% 63.5% 93.9% 143 3.09% 83% 10.10% 11.50%
2.62% 58.1% 91.2% 80 3.17% 84% 10.00% 11.20%
2.52% 59.4% 90.4% 69 3.24% 84% 10.03% 10.53%
Interest Income Interest Expense Net Interest Income Fee income Investment income Other operating income Non-Interest Income Total Revenues Costs PPOP Loan loss provisions Impairment Loss Associate Pre-Tax Tax MI & EO Net profits Disposals/ Exceptionals Reported profits
Change in bps
Source: Company reports and J.P. Morgan estimates.
22
(34) 43 69 44 12 465 53 (47)
(9) 127 (76) (11) 7 (32) 3 (67)
Asia Pacific Equity Research 16 July 2015
Harsh Wardhan Modi (65) 6882- 2450 [email protected]
Hong Leong Bank We expect a weaker set of results in 2Q15, with 10% q/q decline in net earnings, primarily from higher provisions and lower contribution from its associate, Bank of Chengdu. HLBK has recognized writebacks/recoveries in the last three quarters and we expect credit costs to normalize to 7bps during the quarter on the back of weaker asset quality outlook in Malaysia. The possibility of a capital call by end of the year is an overhang to the stock price.
Table 42: HLBK: 2Q15 earnings preview PROFIT AND LOSS
3Q14
4Q14
1Q15
2Q15
3Q15
4Q15E
YoY
QoQ
Interest Income Interest Expense Net Interest Income Fee income Investment income Other operating income Non-Interest Income Total Revenues Costs PPOP Loan loss provisions Impairment Loss Associate Pre-Tax Tax Reported profits
1,647 (860) 787 114 42 6 162 948 (411) 538 (25) 20 107 640 (139) 500
1,618 (838) 781 141 73 11 225 1,006 (467) 539 (24) 1 95 610 (74) 537
1,747 (921) 825 144 38 7 189 1,015 (429) 585 15 5 99 704 (156) 548
1,792 (974) 817 167 34 5 206 1,023 (463) 560 54 2 91 707 (155) 552
1,762 (1,005) 756 146 74 11 232 988 (450) 538 7 7 111 663 (144) 519
1,793 (1,033) 760 162 59 6 227 987 (465) 522 (20) 0 96 599 (133) 466
11% 23% -3% 15% -19% -46% 1% -2% -1% -3% -19% -41% 1% -2% 80% -13%
2% 3% 0% 11% -21% -50% -2% 0% 3% -3% -395% -94% -14% -10% -8% -10%
Common Equity Gross Loans Net Loans Deposits NPL LLR
13,983 101,648 100,015 127,554 1,262 1,633
14,530 104,167 102,579 130,252 1,232 1,588
15,149 104,361 102,823 129,919 1,195 1,538
15,291 107,307 105,942 132,008 1,052 1,364
15,605 110,586 109,325 136,528 988 1,261
15,788 111,643 110,334 137,366 1,180 1,309
9% 7% 8% 5% -4% -18%
1% 1% 1% 1% 19% 4%
NIM CIR LDR Credit Costs (bps) NPL Ratio Coverage Ratio CET1 Ratio Tier 1 Ratio
1.98% 43.3% 78.4% 10 1.24% 129% 9.76% 11.17%
1.93% 46.4% 78.8% 9 1.18% 129% 10.48% 11.88%
1.97% 42.3% 79.1% (6) 1.15% 129% 10.14% 11.49%
1.92% 45.3% 80.3% (20) 0.98% 130% 10.84% 12.20%
1.78% 45.6% 80.1% (2) 0.89% 128% 9.90% 11.06%
1.76% 47.1% 80.3% 7 1.06% 111% 11.64% 13.00%
Change in bps (17) 65 157 (2) (13) (1,797) 116 111
(1) 152 25 10 16 (1,669) 174 194
Source: Company reports and J.P. Morgan estimates.
23
Asia Pacific Equity Research 16 July 2015
Harsh Wardhan Modi (65) 6882- 2450 [email protected]
Maybank (Malayan Banking) We expect Maybank’s net profit to be flat q/q. NIM likely to hold in 2Q on the back of our expectation on stable CoF (supported by the strong domestic CASA base) and non-II to improve, primarily from insurance income segment as we expect M$33mn of profit during the quarter vs. M$111mn loss in 1Q. We expect PPOP to grow 2% q/q but the gain is offset by our higher provision assumption.
Table 43: MAY: 2Q15 earnings preview PROFIT AND LOSS
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15E
YoY
QoQ
5,558 (2,526) 3,032 785 410 37 2 1,234 4,266 (1,999) 2,267 (210) 115 36 2,208 (573) 1,634 (33) 1,602
5,753 (2,671) 3,081 902 390 73 (102) 1,263 4,344 (1,951) 2,393 (154) (29) 37 2,247 (628) 1,619 (43) 1,576
5,983 (2,800) 3,184 958 382 57 (168) 1,228 4,412 (2,158) 2,254 (71) (2) 45 2,226 (579) 1,647 (39) 1,608
6,428 (3,236) 3,192 1,066 360 121 284 1,831 5,024 (2,518) 2,506 35 (154) 45 2,431 (421) 2,010 (79) 1,931
6,400 (3,048) 3,352 937 570 54 (111) 1,450 4,802 (2,305) 2,497 (248) (51) 42 2,241 (530) 1,711 (12) 1,699
6,509 (3,081) 3,428 964 464 56 33 1,518 4,946 (2,405) 2,541 (281) (20) 38 2,278 (547) 1,731 (35) 1,696
13% 15% 11% 7% 19% -23% -132% 20% 14% 23% 6% 82% -31% 2% 1% -13% 7% -19% 8%
2% 1% 2% 3% -19% 5% -130% 5% 3% 4% 2% 13% -61% -10% 2% 3% 1% 200% 0%
Common Equity Gross Loans Net Loans Deposits NPL LLR
50,029 366,080 360,121 395,659 5,561 5,959
50,687 374,359 368,334 406,529 5,597 6,026
51,815 386,960 380,880 420,225 6,373 6,081
54,741 409,472 403,513 439,569 6,234 5,959
57,431 418,007 412,150 447,060 6,265 5,858
56,654 426,607 420,824 455,420 6,307 5,782
12% 14% 14% 12% 13% -4%
-1% 2% 2% 2% 1% -1%
NIM CIR LDR Credit Costs (bps) NPL Ratio Coverage Ratio CET1 Ratio Tier 1 Ratio
2.24% 46.9% 91.0% 23 1.52% 107% 9.98% 12.32%
2.23% 44.9% 90.6% 17 1.50% 108% 10.67% 12.99%
2.24% 48.9% 90.6% 7 1.65% 95% 10.62% 13.20%
2.15% 50.1% 91.8% (3) 1.52% 96% 10.58% 13.18%
2.18% 48.0% 92.2% 24 1.50% 93% 10.63% 12.86%
2.18% 48.6% 92.4% 27 1.48% 92% 10.44% 12.99%
Interest Income Interest Expense Net Interest Income Fee income Investment income Other operating income Insurance Income Non-Interest Income Total Revenues Costs PPOP Loan loss provisions Impairment Loss Associate Pre-Tax Tax Profit before MI MI and EO Core Attributable Profits
Change in bps
Source: Company reports and J.P. Morgan estimates.
24
(5) 371 180 10 (2) (1,598) (23) (20)
0 63 21 3 (2) (181) (19) (22)
Asia Pacific Equity Research 16 July 2015
Harsh Wardhan Modi (65) 6882- 2450 [email protected]
Public Bank PBK’s 2Q15E net earnings are likely to be flat q/q. Though we expect weaker non-II (-6% q/q) during the quarter, we believe PBK will continue to be cost efficient (-5% q/q). Hence, we expect 4% q/q improvement in PPOP. Provisions could be slightly higher this quarter as the bank is always prudent, but we believe PBK’s asset quality will remain resilient.
Table 44: PBK: 2Q15 earnings preview PROFIT AND LOSS
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15E
YoY
QoQ
3,334 (1,725) 1,609 323 115 18 455 2,064 (656) 1,408 (85) 1 3 1,327 (300) (10) 1,017
3,438 (1,813) 1,625 347 111 16 474 2,100 (666) 1,434 (65) (0) (1) 1,368 (300) (11) 1,056
3,681 (1,914) 1,767 356 113 12 481 2,248 (649) 1,599 (47) (0) 0 1,552 (350) (11) 1,192
3,865 (2,104) 1,761 356 128 18 502 2,262 (635) 1,627 (63) 0 3 1,567 (301) (12) 1,254
3,905 (2,166) 1,739 370 140 16 527 2,265 (703) 1,562 (76) 0 2 1,489 (304) (13) 1,172
3,983 (2,184) 1,798 367 110 16 494 2,292 (670) 1,622 (90) 0 1 1,534 (337) (13) 1,183
16% 21% 11% 6% 0% -1% 4% 9% 1% 13% 39% -192% 12% 13% 11% 12%
2% 1% 3% -1% -21% 0% -6% 1% -5% 4% 19% 0% -40% 3% 11% 0% 1%
Common Equity Gross Loans Net Loans Deposits NPL LLR
21,167 226,612 224,836 258,914 1,490 1,775
22,204 232,159 230,379 264,537 1,513 1,780
27,546 237,475 235,670 268,374 1,542 1,805
28,875 245,044 243,222 276,540 1,489 1,822
29,003 253,052 251,233 285,415 1,420 1,819
29,255 257,364 255,532 288,356 1,420 1,832
32% 11% 11% 9% -6% 3%
1% 2% 2% 1% 0% 1%
NIM CIR LDR Credit Costs (bps) NPL Ratio Coverage Ratio CET1 Ratio Tier 1 Ratio
2.13% 31.8% 86.8% 15 0.66% 119% 8.53% 10.07%
2.09% 31.7% 87.1% 11 0.65% 118% 8.91% 10.43%
2.20% 28.9% 87.8% 8 0.65% 117% 10.40% 11.89%
2.12% 28.1% 88.0% 10 0.61% 122% 10.78% 12.23%
2.03% 31.0% 88.0% 12 0.56% 128% 10.48% 11.71%
2.07% 29.2% 88.6% 14 0.55% 129% 10.60% 11.82%
Interest Income Interest Expense Net Interest Income Fee income Investment income Other operating income Non-Interest Income Total Revenues Costs PPOP Loan loss provisions Impairment Loss Associate Pre-Tax Tax MI & EO Reported profits
Change in bps (2) (248) 153 3 (10) 1,141 169 139
3 (179) 59 2 (1) 89 12 11
Source: Company reports and J.P. Morgan estimates.
25
Asia Pacific Equity Research 16 July 2015
Harsh Wardhan Modi (65) 6882- 2450 [email protected]
RHB Capital We expect RHBC’s net earnings to be weaker, primarily driven by higher provisions during the quarter. Consumption has slowed and inflation has inched higher post GST implementation in April. We are concerned of RHBC’s asset quality in this weaker consumption environment as the bank has a fair share of low income borrowers, which are vulnerable to the higher cost of living.
Table 45: RHBC: 2Q15 earnings preview PROFIT AND LOSS Interest Income Interest Expense Net Interest Income Fee income Investment income Other operating income Non-Interest Income Total Revenues Costs PPOP Loan loss provisions Other Provisions Associate Pre-Tax Tax MI & EO Reported profits Common Equity Gross Loans Net Loans Deposits NPL LLR
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15E
YoY
QoQ
2,065 (1,095) 971 323 110 65 498 1,468 (789) 680 (54) 12 0 637 (184) (3) 451
2,181 (1,170) 1,011 299 77 58 434 1,445 (797) 648 (17) 108 0 739 (180) (3) 557
2,297 (1,264) 1,032 381 175 59 615 1,647 (841) 806 (94) 3 0 715 (163) (7) 545
2,383 (1,373) 1,009 451 140 74 665 1,674 (985) 690 (40) (6) 0 644 (145) (13) 486
2,419 (1,417) 1,002 315 131 60 506 1,509 (820) 689 (50) 6 0 645 (165) (3) 476
2,438 (1,444) 994 342 126 63 532 1,525 (844) 681 (80) 0 0 601 (150) (4) 447
12% 23% -2% 15% 64% 8% 23% 6% 6% 5% 361% -100% -100% -19% -16% 40% -20%
1% 2% -1% 9% -4% 5% 5% 1% 3% -1% 59% -100% -100% -7% -9% 20% -6%
17,396 126,265 124,068 143,272 3,210 2,197
17,957 132,452 130,288 149,571 3,245 2,164
18,528 135,987 133,913 148,108 3,115 2,074
18,894 142,459 140,693 157,134 2,892 1,766
19,618 143,540 141,774 158,684 2,908 1,766
17,891 145,324 143,529 161,161 3,023 1,795
0% 10% 10% 8% -7% -17%
-9% 1% 1% 2% 4% 2%
2.12% 53.7% 88.1% 17 2.54% 68% 8.60%
2.12% 55.2% 88.6% 5 2.45% 67% 9.20%
2.09% 51.1% 91.8% 28 2.29% 67% 9.10%
1.98% 58.8% 90.7% 12 2.03% 61% 9.80%
1.91% 54.3% 90.5% 14 2.03% 61% 9.80%
1.87% 55.3% 90.2% 22 2.08% 59% 12.94%
Change in bps NIM CIR LDR Credit Costs (bps) NPL Ratio Coverage Ratio CET1 Ratio
Source: Company reports and J.P. Morgan estimates.
26
(25) 18 162 17 (37) (732) 374
(4) 99 (28) 8 5 (136) 314
Harsh Wardhan Modi (65) 6882- 2450 [email protected]
Asia Pacific Equity Research 16 July 2015
Philippine Banks We expect a sequential improvement in RoE from 2Q15-4Q15 driven by improving core income amid prudent cost growth. This is following a drop from 1Q15, which was an unusually strong trading quarter for a number of banks. On a core basis, we see banks improving RoE as they benefit from the country's underpenetrated market, high liquidity, and benign asset quality issues. One of the key risks is dilution from capital raising. Table 46: Philippine Industry DuPont Du Pont Item NIM
1Q14 4.18
2Q14 4.14
3Q14 4.08
4Q14 4.05
1Q15 3.98
2Q15E 4.02
3Q15E 4.14
4Q15E 4.10
NII/Assets
3.52
3.50
3.46
3.40
3.31
3.44
3.55
3.60
Non II/Assets
1.63
1.96
1.92
1.60
2.10
1.68
1.66
1.61
Rev/Assets
5.06
5.40
5.32
4.81
5.42
5.04
5.15
5.02
Costs/Assets
3.11
3.14
3.11
2.96
2.97
3.05
3.03
2.98
Costs/income
59.72
57.32
59.03
59.42
55.53
59.47
58.15
57.18
Opt Profits/Assets
2.04
2.32
2.27
2.04
2.44
2.07
2.18
2.23
Credit Cost
(0.91) 1.30
(1.09) 1.45
(0.81) 1.48
(1.05) 1.22
(0.85) 1.55
(1.01) 1.22
(0.99) 1.29
(1.02) 1.30
ROA A/E
9.19
9.06
8.98
9.08
9.15
9.05
9.08
9.52
ROE
12.16
13.03
13.37
11.48
14.18
11.27
11.97
11.67
We expect stable to slightly improving NIMs going forward as banks shift their loan book to higher-yielding middle market and consumer loans. Bond yields are at record lows and should move with the rate cycle over the next few years. Competition will keep corporate loan yields low, but the system remains liquid with LDR still at 60% levels. Table 47: NIM (%) NIMs are determined by: (1) competition, (2) shift in loan mix, and (3) market interest rates
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15E
3Q15E
4Q15E
BPI
3.00
3.10
3.10
2.92
3.10
3.07
3.05
3.16
SECB
3.54
3.40
3.26
3.28
3.25
3.56
3.61
3.48
BDO
3.11
3.17
3.17
3.27
3.04
3.08
3.22
3.16
MBT
3.92
3.84
3.76
3.40
3.50
3.60
3.66
3.60
EW
8.00
8.20
8.10
7.90
7.80
7.57
7.97
7.77
PNB
3.53
3.13
3.12
3.55
3.17
3.27
3.33
3.41
Sector
4.18
4.14
4.08
4.05
3.98
4.02
4.14
4.10
Source: Company reports and J.P. Morgan estimates.
27
Harsh Wardhan Modi (65) 6882- 2450 [email protected]
Asia Pacific Equity Research 16 July 2015
Non-II should drop off from 1Q15 levels, in our view, as 1Q15 was a strong bond trading quarter for a number of banks. Core non-II (fees and other income) should continue its robust growth. Table 48: Non-II/Total Assets (%) 1Q14
2Q14
3Q14
4Q14
1Q15
2Q15E
3Q15E
4Q15E
BPI
1.39
1.59
1.72
1.81
1.43
1.54
1.70
1.74
SECB
0.87
1.91
2.64
0.54
3.40
1.21
1.16
0.79
BDO
1.71
1.74
1.76
1.68
1.89
1.68
1.58
1.61
MBT
1.43
1.30
1.22
1.37
1.63
1.30
1.29
1.30
EW
3.03
3.20
3.05
2.86
3.02
2.92
2.85
2.78
PNB
1.38
2.00
1.15
1.32
1.26
1.41
1.39
1.45
Sector
1.63
1.96
1.92
1.60
2.10
1.68
1.66
1.61
Source: Company reports and J.P. Morgan estimates.
Table 49: Revenue/Total Assets (%) Revenue growth driven by core income growth, tempered by weaker trading gains
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15E
3Q15E
4Q15E
BPI
4.07
4.20
4.45
4.23
4.10
4.14
4.37
4.50
SECB
3.78
5.04
5.60
3.24
6.18
4.45
4.44
3.76
BDO
4.67
4.69
4.65
4.59
4.75
4.49
4.52
4.50
MBT
4.61
4.38
4.29
4.26
4.51
4.29
4.32
4.33
EW
8.97
9.48
9.09
8.39
8.98
8.62
8.96
8.58
PNB
4.29
4.63
3.80
4.12
4.00
4.27
4.31
4.46
Sector
5.06
5.40
5.32
4.81
5.42
5.04
5.15
5.02
Source: Company reports and J.P. Morgan estimates.
We expect costs to increase slightly over the next few quarters as banks remain in investment mode. We believe the divergence in cost/assets is a key driver of returns. The ability to grow while keeping costs low will determine outperformance over the next few quarters. Table 50: Cost/Total Assets (%) Prudent cost growth will be a key driver of performance
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15E
3Q15E
4Q15E
BPI
2.23
2.34
2.28
2.48
2.04
2.22
2.25
2.42
SECB
1.89
2.11
2.10
2.34
2.49
2.31
2.24
2.11
BDO
2.87
2.96
2.95
2.58
2.86
2.80
2.78
2.65
MBT
2.96
2.67
2.70
2.88
2.43
2.68
2.76
2.81
EW
5.77
5.74
5.48
5.34
5.20
5.33
5.27
5.21
PNB
2.92
3.04
3.16
2.15
2.81
2.95
2.89
2.71
Sector
3.11
3.14
3.11
2.96
2.97
3.05
3.03
2.98
Source: Company reports and J.P. Morgan estimates.
28
Harsh Wardhan Modi (65) 6882- 2450 [email protected]
Asia Pacific Equity Research 16 July 2015
Table 51: Operating profits/Total Assets (%) 1Q14
2Q14
3Q14
4Q14
1Q15
2Q15E
3Q15E
4Q15E
BPI
1.87
2.01
2.16
1.99
2.02
2.03
2.18
2.20
SECB
2.04
2.98
3.36
1.03
3.78
2.02
2.23
1.89
BDO
1.76
1.78
1.79
2.16
1.88
1.78
1.81
1.97
MBT
1.69
1.78
1.68
1.52
2.09
1.63
1.63
1.64
EW
3.55
3.81
3.92
3.55
3.70
3.58
3.75
3.84
PNB
1.35
1.55
0.68
2.00
1.17
1.38
1.48
1.81
Sector
2.04
2.32
2.27
2.04
2.44
2.07
2.18
2.23
Source: Company reports and J.P. Morgan estimates.
We expect credit costs to remain broadly stable over the next few quarters as the system remains in the early stages of the asset cycle. Credit costs may decline if banks compete more aggressively on asset quality to sustain loan growth. Table 52: Credit cost Banks continue to see no asset quality issues in the system
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15E
3Q15E
4Q15E
BPI
0.56
0.51
0.49
0.08
0.52
0.50
0.49
0.56
SECB
0.32
1.31
0.19
0.01
0.38
0.45
0.45
0.50
BDO
0.53
0.49
0.47
0.41
0.39
0.45
0.46
0.49
MBT
0.73
0.48
0.80
0.83
0.47
0.70
0.70
0.75
EW
2.93
2.88
2.74
3.43
3.12
3.08
2.96
2.91
PNB
0.41
0.89
0.16
1.50
0.20
0.86
0.86
0.94
Sector
0.91
1.09
0.81
1.05
0.85
1.01
0.99
1.02
Source: Company reports and J.P. Morgan estimates.
Table 53: ROA (%) 1Q14
2Q14
3Q14
4Q14
1Q15
2Q15E
3Q15E
4Q15E
BPI
1.20
1.41
1.47
1.53
1.37
1.42
1.53
1.50
SECB
1.58
2.29
3.00
0.76
3.34
1.42
1.49
1.23
BDO
1.32
1.34
1.33
1.34
1.32
1.23
1.26
1.35
MBT
1.62
0.95
1.07
1.81
1.25
1.20
1.18
1.18
EW
1.23
1.53
1.72
0.75
1.29
1.17
1.33
1.42
PNB
0.87
1.20
0.31
1.12
0.77
0.89
0.95
1.13
Sector
1.30
1.45
1.48
1.22
1.55
1.22
1.29
1.30
Source: Company reports and J.P. Morgan estimates.
29
Harsh Wardhan Modi (65) 6882- 2450 [email protected]
Asia Pacific Equity Research 16 July 2015
Leverage should increase over the next few quarters as we have not factored in any equity raising. Any bank that does a capital call would pose downside risk to our estimates. Table 54: Asset/Equity (%) 1Q14
2Q14
3Q14
4Q14
1Q15
2Q15E
3Q15E
4Q15E
10.22
9.53
9.61
9.75
9.91
9.97
10.11
14.21
SECB
8.75
8.89
8.37
8.21
8.31
7.81
7.46
7.83
BDO
10.40
10.30
10.40
10.60
10.65
10.64
10.81
10.61
MBT
10.74
10.83
11.00
11.09
11.03
10.89
10.86
10.15
EW
7.55
7.69
7.80
8.37
8.58
8.59
8.71
7.69
PNB
7.49
7.10
6.68
6.47
6.44
6.41
6.51
6.61
Sector
9.19
9.06
8.98
9.08
9.15
9.05
9.08
9.52
BPI
Source: Company reports and J.P. Morgan estimates.
Table 55: ROE (%) 1Q14
2Q14
3Q14
4Q14
1Q15
2Q15E
3Q15E
4Q15E
BPI
12.22
13.43
14.13
14.87
13.58
14.11
15.44
15.22
SECB
13.78
20.38
25.08
6.25
27.70
11.57
12.26
10.15
BDO
13.73
13.79
13.79
14.19
14.03
13.14
13.59
14.29
MBT
17.39
10.32
11.77
20.05
13.75
13.08
12.77
11.97
EW
9.30
11.74
13.41
6.28
11.05
10.06
11.56
10.89
PNB
6.54
8.49
2.06
7.24
4.97
5.67
6.21
7.50
12.16
13.03
13.37
11.48
14.18
11.27
11.97
11.67
Sector
Source: Company reports and J.P. Morgan estimates.
30
Asia Pacific Equity Research 16 July 2015
Harsh Wardhan Modi (65) 6882- 2450 [email protected]
Bank of the Philippine Islands (BPI) We expect BPI to continue its growth trajectory with net income of Php5.16bn in 2Q15, up 16% y/y, 5% q/q. We expect loan growth to recover (9% q/q from -9% in 1Q15), driving NII (+5% q/q). The bank’s focus on fee income and cross-sell is expected to continue, driving 13% non-II growth. Cost growth should decline from year-ago levels to 10% y/y, in our view. Continued delivery on its growth strategy and prudent cost growth will be key for BPI.
Table 56: BPI: 2Q15 earnings preview
PROFIT AND LOSS
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15E
YoY
Interest Income
10,819
11,251
11,634
12,288
12,559
12,937
15%
3%
Interest Expense
(2,632)
(2,586)
(2,811)
(3,155)
(3,130)
(3,084)
19%
-1%
Net Interest Income
8,186
8,665
8,823
9,134
9,428
9,854
14%
5%
Non-Interest Income
4,182
4,992
5,590
6,215
5,128
5,628
13%
10%
Net Fee income
1,707
1,561
1,824
2,279
1,736
2,049
31%
18%
Trading income
412
1,299
562
1,096
1,273
1,037
-20%
-19%
Other operating income
QoQ
2,063
2,132
3,205
2,840
2,119
2,543
19%
20%
Total Revenues
12,368
13,657
14,413
15,349
14,557
15,482
13%
6%
Costs
(6,723)
(7,339)
(7,392)
(8,507)
(7,316)
(8,076)
10%
10%
PPOP
5,645
6,318
7,021
6,842
7,241
7,406
17%
2%
Loan loss provisions
(915)
(864)
(879)
(149)
(1,021)
(972)
12%
-5%
Pre-Tax
4,730
5,454
6,142
6,694
6,220
6,434
18%
3%
(1,115)
(1,036)
(1,383)
(1,425)
(1,217)
(1,287)
24%
6%
Net income
3,615
4,418
4,759
5,269
5,003
5,147
16%
3%
MI and EO
(12)
8
12
(32)
(88)
10
20%
-111%
3,603
4,427
4,772
5,237
4,915
5,157
16%
5%
Common Equity
131,290
132,480
137,617
144,063
145,590
146,785
11%
1%
Gross Loans
655,014
711,037
715,675
813,964
743,640
809,992
14%
9%
Net Loans
641,729
697,047
701,645
800,170
729,519
795,304
14%
9%
Deposits
Tax
Core Attributable Profit
992,683
1,071,785
1,044,107
1,176,213
1,158,708
1,228,305
15%
6%
NPL
12,312
13,183
12,755
12,540
12,642
13,386
2%
6%
LLR
13,285
13,990
14,031
13,794
14,121
14,688
5%
4%
NIM
3.00%
3.10%
3.10%
2.92%
3.10%
3.07%
(3)
(3)
CIR
54%
54%
51%
55%
50%
52%
(157)
190
LDR
66%
66%
69%
69%
64%
66%
(40)
177
56
49
49
7
55
48
(1)
(7)
Change in bps
Credit Costs (bps) NPL Ratio
1.9%
1.9%
1.8%
1.5%
1.7%
1.7%
(20)
(5)
Coverage Ratio
108%
106%
110%
110%
112%
110%
361
(197)
Source: Company reports and J.P. Morgan estimates.
31
Asia Pacific Equity Research 16 July 2015
Harsh Wardhan Modi (65) 6882- 2450 [email protected]
Security Bank Corporation (SECB) SECB delivered extraordinary net income of Php3.41bn in 1Q15 as the bank booked gains on sale of HTC securities. We expect income to normalize to Php1.4bn in 2Q, as non-II drops 68% q/q. Core trends should remain intact, as we expect NII to increase 4% q/q on 5% q/q loan growth. SECB’s ability to deliver returns ex-treasury and its level of operating expenses bear close watch, in our view.
Table 57: SECB: 2Q15 earnings preview
PROFIT AND LOSS
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15E
YoY
QoQ
Interest Income
3,703
4,000
3,765
3,926
4,301
4,482
12%
4% 4%
Interest Expense
(926)
(971)
(1,111)
(1,225)
(1,329)
(1,384)
43%
Net Interest Income
2,776
3,029
2,654
2,702
2,972
3,098
2%
4%
Non-Interest Income
790
1,822
2,477
520
3,400
1,090
-40%
-68%
Net Fee income
361
403
306
444
484
460
14%
-5%
Trading income
312
1,253
1,970
(112)
2,600
450
-64%
-83%
Other operating income
117
166
201
188
316
180
9%
-43%
3,566
4,851
5,131
3,222
6,372
4,187
-14%
-34%
Costs
(1,714)
(2,010)
(1,974)
(2,237)
(2,485)
(2,272)
13%
-9%
PPOP
1,853
2,841
3,156
984
3,887
1,915
-33%
-51%
Loan loss provisions
(133)
(567)
(84)
(6)
(189)
(234)
-59%
24%
Total Revenues
Other provisions
0
0
0
36
0
0
Pre-Tax Tax
1,719 (279)
2,274 (75)
3,072 (240)
1,014 (275)
3,698 (277)
1,681 (269)
-26% 258%
-55% -3%
Net income
1,440
2,199
2,832
740
3,421
1,412
-36%
-59%
MI and EO
(13)
(13)
(18)
(14)
(12)
(12)
-5%
0%
1,428
2,187
2,814
726
3,409
1,400
-36%
-59%
Core Attributable profit Common Equity
42,133
43,698
46,079
46,881
49,687
51,087
17%
3%
Gross Loans
169,364
176,622
185,147
197,184
203,054
213,070
21%
5%
Net Loans
166,252
172,996
181,400
194,004
199,584
209,365
21%
5%
Deposits
210,986
218,152
231,699
246,813
247,247
257,230
18%
4%
NPL
1,573
1,723
1,764
1,841
1,930
2,021
17%
5%
LLR
3,112
3,626
3,747
3,180
3,470
3,704
2%
7%
NIM
3.54%
3.40%
3.26%
3.28%
3.30%
3.27%
(13)
(3)
CIR
48%
41%
38%
69%
39%
54%
1,283
1,526
LDR
79%
79%
78%
79%
81%
81%
209
67
Change in bps
Credit Costs (bps)
31
128
18
1
37
44
(84)
7
NPL Ratio
0.9%
1.0%
1.0%
0.9%
1.0%
0.9%
(3)
(0)
Coverage Ratio
198%
210%
212%
173%
180%
183%
(2,711)
347
Source: Company reports and J.P. Morgan estimates.
32
Harsh Wardhan Modi (65) 6882- 2450 [email protected]
Asia Pacific Equity Research 16 July 2015
Banco de Oro (BDO) We expect BDO to deliver net income of Php5.84bn, up 5% y/y, down 5% q/q, despite continued growth in NII (+3% q/q). We expect treasury income to normalize (-52% q/q), affecting both topline and tax rate. A key data point to watch for BDO is its CET 1 ratio, as the bank ended 1Q15 with CET 1 of 11.9% at the consolidated level and 10.6% at the parent level. The D-SIB requirement of 11% will be phased in from 2017-19.
Table 58: BDO: 2Q15 earnings preview 1Q14
2Q14
3Q14
4Q14
1Q15
2Q15E
YoY
QoQ
Interest Income
15,127
15,462
15,858
17,136
16,770
17,155
13%
0%
Interest Expense
(2,994)
(2,970)
(3,040)
(3,354)
(3,514)
(3,477)
16%
4%
Net Interest Income
12,133
12,492
12,818
13,782
13,256
13,678
9%
3%
Non-Interest Income
7,078
7,259
7,542
7,608
8,772
7,932
9%
-10%
Net Fee income
3,387
3,780
3,903
4,316
3,593
4,419
17%
23%
Trading income
2,226
2,009
1,853
1,024
3,430
1,659
-17%
-52%
PROFIT AND LOSS
Other operating income
1,465
1,470
1,786
2,268
1,749
1,854
26%
6%
19,211
19,751
20,360
21,390
22,028
21,610
9%
-2%
Costs
(11,900)
(12,335)
(12,655)
(11,640)
(13,299)
(13,214)
7%
-1%
PPOP
7,311
7,416
7,705
9,750
8,729
8,397
13%
-4%
(1,293)
(1,260)
(1,325)
(1,236)
(1,168)
(1,360)
8%
16%
6,018
6,156
6,380
8,514
7,561
7,037
14%
-7%
Total Revenues
Loan loss provisions Pre-Tax Tax
(547)
(572)
(680)
(2,441)
(1,434)
(1,196)
109%
-17%
Net income
5,471
5,584
5,700
6,073
6,127
5,841
5%
-5%
3
(10)
(8)
(23)
(6)
(6)
-40%
0%
5,474
5,574
5,692
6,050
6,121
5,835
5%
-5%
MI and EO Core Reported profit to all SHs Common Equity
160,410
162,928
167,272
173,886
175,220
179,950
10%
3%
Gross Loans
999,649
1,057,536
1,182,997
1,239,682
1,162,019
1,235,940
17%
6%
Net Loans
974,099
1,030,827
1,156,198
1,212,930
1,134,979
1,209,394
17%
7% 4%
Deposits
1,334,391
1,365,917
1,424,862
1,492,282
1,492,131
1,550,447
14%
NPL
14,630
15,392
14,574
14,197
14,060
14,641
-5%
4%
LLR
25,550
26,709
26,799
21,567
27,040
26,546
-1%
-2%
NIM
3.11%
3.17%
3.17%
3.27%
3.04%
3.08%
(9)
4
CIR
62%
62%
62%
54%
60%
61%
(131)
77
LDR
73%
75%
81%
81%
76%
78%
254
194
52
48
45
40
40
44
(4)
4
Change in bps
Credit Costs (bps) NPL Ratio
1.5%
1.5%
1.2%
1.1%
1.2%
1.2%
(27)
(3)
Coverage Ratio
175%
174%
184%
152%
192%
181%
778
(1,101)
. Source: Company reports and J.P. Morgan estimates.
33
Asia Pacific Equity Research 16 July 2015
Harsh Wardhan Modi (65) 6882- 2450 [email protected]
Metropolitan Bank (MBT) We expect MBT’s core income to decline 30% q/q to Php 3.57bn, up 5% from yearago levels, as both trading income (down 55% q/q) and costs (up 11% q/q) normalize from 1Q15 levels. We expect the bank to deliver 7% q/q loan growth following its Php 32bn stock rights offering in April 2015. We think the market should be watching delivery of loan growth, as well as margins, which have generally trended downward in the past few quarters. Upside risk comes from the possibility of lower-than-expected operating expenses.
Table 59: MBT: 2Q15 earnings preview
PROFIT AND LOSS
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15E
YoY
QoQ
Interest Income
14,178
14,457
15,094
15,565
15,696
16,278
13%
4%
Interest Expense
(3,022)
(3,254)
(3,438)
(3,817)
(4,035)
(4,088)
26%
1%
Net Interest Income
11,156
11,203
11,656
11,748
11,661
12,190
9%
5%
Non-Interest Income
4,978
4,632
4,520
5,344
6,547
5,251
13%
-20%
Net Fee income
2,127
2,322
2,198
2,251
2,454
2,405
4%
-2% -55%
Trading income
865
230
410
1,698
2,267
1,020
344%
1,986
2,080
1,912
1,395
1,826
1,826
-12%
0%
16,134
15,835
16,176
17,092
18,208
17,441
10%
-4%
(10,266)
(9,499)
(9,978)
(11,181)
(9,787)
(10,849)
14%
11%
5,868 (1,150)
6,336 (782)
6,198 (1,368)
5,911 (1,549)
8,421 (898)
6,593 (1,381)
4% 77%
-22% 54%
4,718
5,554
4,830
4,362
7,523
5,211
-6%
-31%
Tax
(973)
(1,293)
(845)
(298)
(1,412)
(1,068)
-17%
-24%
Net income
3,745
4,261
3,985
4,064
6,111
4,143
-3%
-32%
MI and EO
(859)
(872)
(726)
(535)
(1,031)
(570)
-35%
-45%
Core Attributable Profit
2,886
3,389
3,259
3,529
5,080
3,573
5%
-30%
Non-recurring items
2,800
-
743
3,507
-
1,300
-
-
Attributable Profit
5,686
3,389
4,002
7,036
5,080
4,873
44%
-4%
Net attributable profit
5,433
3,389
3,781
7,011
4,831
4,873
44%
1%
Common Equity
130,187
132,531
135,832
144,616
147,222
150,765
14%
2%
Gross Loans
637,365
661,268
710,757
775,931
759,905
812,419
23%
7%
Net Loans
623,531
647,531
697,304
759,481
743,805
795,751
23%
7%
1,038,488
1,074,548
1,106,816
1,184,454
1,223,418
1,216,121
13%
-1%
Other operating income Total Revenues Costs PPOP Loan loss provisions Pre-Tax
Deposits NPL
8,925
8,596
7,960
7,774
9,699
9,699
13%
0%
LLR
13,834
13,737
13,453
16,450
16,100
16,669
21%
4%
NIM
3.92%
3.84%
3.76%
3.40%
3.50%
3.60%
(24)
10
CIR
64%
60%
62%
65%
54%
62%
221
845
LDR
60%
60%
63%
64%
61%
65%
517
464
72
47
77
80
47
68
21
21
Change in bps
Credit Costs (bps) NPL Ratio
1.4%
1.3%
1.1%
1.0%
1.3%
1.2%
(11)
(8)
Coverage Ratio
155%
160%
169%
212%
166%
172%
1,206
586
Source: Company reports and J.P. Morgan estimates.
34
Asia Pacific Equity Research 16 July 2015
Harsh Wardhan Modi (65) 6882- 2450 [email protected]
East West Banking Corporation (EW) We expect EW to deliver net income of Php561m in 2Q15, down 5% y/y, 7% q/q, as trading income normalizes. We expect continued core income growth, supported by strong loan growth (+25% y/y, +6% q/q). Sustaining its above-industry loan growth, maintaining NIMs, and managing costs will be imperative for the bank to deliver higher returns.
Table 60: EW: 2Q15 earnings preview
PROFIT AND LOSS
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15E
YoY
Interest Income
2,669
2,808
3,000
3,190
3,296
3,417
22%
4%
Interest Expense
(342)
(352)
(436)
(511)
(558)
(548)
56%
-2%
Net Interest Income
2,328
2,456
2,564
2,678
2,738
2,869
17%
5%
Non-Interest Income
1,121
1,240
1,230
1,269
1,409
1,398
13%
-1%
Net Fee income
749
754
863
932
1,040
1,061
41%
2%
Trading income
321
429
8
241
297
237
-45%
-20%
Other operating income
QoQ
51
57
359
96
72
100
75%
39%
3,449
3,696
3,794
3,947
4,147
4,267
15%
3%
Costs
(2,134)
(2,221)
(2,213)
(2,370)
(2,424)
(2,552)
15%
5%
PPOP
1,315
1,476
1,581
1,577
1,724
1,715
16%
0%
Loan loss provisions
(741)
(766)
(768)
(1,037)
(985)
(1,012)
32%
3%
574
710
813
540
739
704
-1%
-5%
Total Revenues
Pre-Tax Tax
(118)
(119)
(119)
(207)
(139)
(143)
20%
3%
Net income
456
591
694
333
600
561
-5%
-7%
Core Attributable profit
456
591
694
333
600
561
-5%
-7%
Common Equity
19,831
20,422
20,970
21,448
22,010
22,571
11%
3%
104,279
108,260
116,160
125,420
126,852
135,547
25%
7%
Net Loans
99,671
103,790
112,142
121,423
122,487
130,170
25%
6%
Deposits
8%
Gross Loans
122,912
126,140
127,651
147,687
146,859
158,855
26%
NPL
5,257
5,918
8,694
5,770
6,265
6,518
10%
4%
LLR
4,608
4,470
4,019
3,997
4,365
5,377
20%
23%
NIM
8.00%
8.20%
8.10%
7.90%
7.80%
7.57%
(63)
CIR
62%
60%
58%
60%
58%
60%
(28)
136
LDR
81%
82%
88%
82%
83%
82%
(34)
(146) (12)
Change in bps
Credit Costs (bps)
(23)
284
283
265
331
311
299
16
NPL Ratio
5.0%
5.5%
7.5%
4.6%
4.9%
4.8%
(66)
(13)
Coverage Ratio
88%
76%
46%
69%
70%
82%
695
1,281
Source: Company reports and J.P. Morgan estimates.
35
Asia Pacific Equity Research 16 July 2015
Harsh Wardhan Modi (65) 6882- 2450 [email protected]
Philippine National Bank (PNB) We expect PNB income to grow 16% q/q to Php1.4bn in 2Q15, with a boost from ~Php320m worth of asset sale gains. We expect core income to decline 11% q/q, 11% y/y to Php1.08bn as both trading income and loan loss provisions return to normalized levels. We think the market should be watching the bank’s execution on its core growth strategy, continued gains from its ROPOA sale, and improving cost ratios.
Table 61: PNB: 2Q15 earnings preview
PROFIT AND LOSS
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15E
YoY
QoQ
Interest Income
5,360
4,825
4,991
5,343
5,218
5,598
16%
7%
Interest Expense
(914)
(886)
(896)
(950)
(966)
(987)
11%
2%
Net Interest Income
4,446
3,939
4,095
4,393
4,252
4,612
17%
8%
Non-Interest Income
2,112
3,027
1,748
2,041
1,956
2,222
-27%
14% 6%
Net Fee income
638
647
570
685
637
675
4%
Trading income
581
1,383
229
383
500
523
-62%
5%
Other operating income
893
997
949
973
819
1,023
3%
25% 10%
Total Revenues
6,559
6,967
5,844
6,434
6,208
6,833
-2%
Costs
(4,490)
(4,615)
(4,805)
(3,331)
(4,382)
(4,657)
1%
6%
PPOP
2,069
2,352
1,038
3,103
1,826
2,177
-7%
19%
Loan loss provisions
(291)
(641)
(121)
(1,212)
(159)
(710)
11%
346%
Pre-Tax
1,778
1,711
917
1,892
1,666
1,466
-14%
-12%
Tax
(435)
(452)
(412)
(111)
(425)
(359)
-21%
-15%
Net income
1,343
1,259
505
1,780
1,242
1,107
-12%
-11%
(3)
(53)
(37)
(44)
(40)
(32)
-39%
-21%
1,340
1,206
469
1,737
1,201
1,075
-11%
-11%
Non recurring items
0
608
0
0
0
320
-47%
Attributable Profit
1,340
1,814
469
1,737
1,201
1,395
-23%
16%
84,663
86,170
95,933
95,848
97,652
99,047
15%
1%
Gross Loans
282,704
292,047
315,891
328,689
323,239
338,326
16%
5%
Net Loans
270,715
279,475
303,519
316,253
310,874
325,082
16%
5%
Deposits
452,869
437,666
436,271
447,644
441,035
458,319
5%
4%
NPL
10,324
10,700
10,527
9,921
9,301
8,692
-19%
-7%
LLR
11,989
12,572
12,372
12,436
12,365
13,245
5%
MI and EO Core Attributable profit
Common Equity
7% Change in bps
NIM
3.53%
3.13%
3.12%
3.55%
3.17%
3.27%
13
10
CIR
68%
66%
82%
52%
71%
68%
190
(244)
LDR
60%
64%
70%
71%
70%
71%
707
44
41
88
15
147
20
84
(4)
64
NPL Ratio
3.7%
3.7%
3.3%
3.0%
2.9%
2.6%
(109)
(31)
Coverage Ratio
116%
117%
118%
125%
133%
152%
3,489
1,944
Credit Costs (bps)
Source: Company reports and J.P. Morgan estimates.
36
Harsh Wardhan Modi (65) 6882- 2450 [email protected]
Asia Pacific Equity Research 16 July 2015
Thailand Banks We expect a steady decline in ROE during 2Q15-4Q15 period due to a weak macro outlook and lack of visibility of earnings recovery. NIMs are likely to be under pressure and the risk of asset quality deterioration continues to weigh on share price performance. Table 62: Thailand Industry DuPont Du Pont Item
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15E
3Q15E
4Q15E
NIM
3.13
3.24
3.28
3.25
3.15
2.98
2.94
2.91
NII/Assets
2.96
3.09
3.13
3.09
3.00
2.85
2.82
2.79
Non II/Assets
1.50
1.52
1.52
1.57
1.56
1.45
1.47
1.56
Rev/Assets
4.45
4.60
4.61
4.61
4.41
4.28
4.26
4.39
Costs/Assets
2.01
2.09
2.07
2.29
2.02
2.00
2.01
2.16
Costs/income
45.61
45.52
44.74
49.26
44.43
46.92
47.24
50.32
Opt Profits/Assets
2.45
2.52
2.58
2.38
2.54
2.30
2.28
2.19
Credit Cost
0.88
0.89
0.96
0.94
1.15
1.12
1.15
1.15 1.12
ROA
1.49
1.59
1.61
1.49
1.45
1.25
1.22
A/E
10.43
10.24
10.12
10.00
9.90
9.84
9.77
9.54
ROE
15.35
16.16
16.13
14.87
14.01
12.09
11.71
10.28
Source: Company reports and J.P. Morgan estimates.
Table 63: NIM (%)
We expect NIMs to be under pressure across the board
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15E
3Q15E
4Q15E
BAY
4.15
4.25
4.28
4.27
4.11
3.43
3.47
3.36
BBL
2.20
2.35
2.37
2.26
2.08
2.00
1.94
1.94
KBANK
3.61
3.75
3.79
3.85
3.67
3.61
3.50
3.44
KTB
2.77
2.88
2.85
2.73
2.87
2.74
2.73
2.72
SCB
3.20
3.34
3.35
3.22
3.18
3.13
3.12
3.10
TMB
2.82
2.84
3.03
3.14
3.00
2.96
2.89
2.90
Sector
3.13
3.24
3.28
3.25
3.15
2.98
2.94
2.91
Source: Company reports and J.P. Morgan estimates.
Table 64: Non-II/Total Assets (%)
Non-NII growth could trend much lower down in 2QE
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15E
3Q15E
4Q15E
BAY
1.67
1.72
1.72
2.05
1.64
1.49
1.66
2.29
BBL
1.26
1.28
1.22
1.12
1.38
1.16
1.17
1.13
KBANK
2.32
2.30
2.35
2.27
2.47
2.33
2.29
2.15
KTB
1.02
1.13
1.09
1.09
1.06
1.04
1.02
1.04
SCB
1.80
1.73
1.66
1.70
1.75
1.68
1.72
1.71
TMB
0.92
0.97
1.10
1.21
1.09
0.98
0.98
1.01
Sector
1.50
1.52
1.52
1.57
1.56
1.45
1.47
1.56
Source: Company reports and J.P. Morgan estimates.
37
Harsh Wardhan Modi (65) 6882- 2450 [email protected]
NIM compression and declining Non-II will lead to a fall in Revenue/Total Assets
Asia Pacific Equity Research 16 July 2015
Table 65: Revenue/Total Assets (%) 1Q14
2Q14
3Q14
4Q14
1Q15
2Q15E
3Q15E
4Q15E
BAY
5.55
5.69
5.63
6.14
4.82
4.74
4.94
5.78
BBL
3.43
3.63
3.54
3.24
3.38
3.11
3.06
3.02
KBANK
5.69
5.81
5.84
5.92
5.81
5.72
5.56
5.41
KTB
3.67
3.96
3.81
3.61
3.71
3.66
3.63
3.73
SCB
4.89
4.92
4.82
4.71
4.81
4.67
4.69
4.68
TMB
3.50
3.56
4.00
4.04
3.93
3.77
3.70
3.71
Sector
4.45
4.60
4.61
4.61
4.41
4.28
4.26
4.39
Source: Company reports and J.P. Morgan estimates.
Table 66: Cost/Total Assets (%) 1Q14
2Q14
3Q14
4Q14
1Q15
2Q15E
3Q15E
4Q15E
BAY
2.81
2.85
2.82
2.92
2.62
2.30
2.32
2.65
BBL
1.45
1.70
1.65
1.80
1.49
1.58
1.57
1.59
KBANK
2.30
2.60
2.52
3.01
2.54
2.55
2.65
2.68
KTB
1.82
1.64
1.64
1.74
1.87
1.63
1.62
1.80
SCB
1.75
1.86
1.85
2.00
1.86
1.88
1.85
1.86
TMB
1.95
1.89
1.97
2.24
1.76
2.03
2.04
2.36
Sector
2.01
2.09
2.07
2.29
2.02
2.00
2.01
2.16
Source: Company reports and J.P. Morgan estimates.
Table 67: Operating profits/Total Assets (%) 1Q14
2Q14
3Q14
4Q14
1Q15
2Q15E
3Q15E
4Q15E
BAY
2.75
2.87
2.92
3.16
2.92
2.43
2.63
2.87
BBL
1.98
1.90
1.91
1.54
1.93
1.55
1.51
1.45
KBANK
3.41
3.24
3.42
2.88
3.38
3.19
2.96
2.71
KTB
1.87
2.28
2.23
1.99
1.94
2.04
2.03
1.87
SCB
3.13
3.10
3.03
2.78
2.94
2.82
2.87
2.83
TMB
1.58
1.73
1.95
1.91
2.15
1.76
1.69
1.38
Sector
2.45
2.52
2.58
2.38
2.54
2.30
2.28
2.19
Source: Company reports and J.P. Morgan estimates.
Table 68: Credit cost
We expect marginal increase in credit cost on the back of asset quality concerns
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15E
3Q15E
4Q15E
BAY
1.73
1.80
2.03
1.96
1.86
1.30
1.31
1.19
BBL
0.48
0.53
0.75
0.21
0.67
0.80
0.80
0.94
KBANK
1.01
0.83
0.98
1.02
1.04
1.41
1.41
1.39
KTB
0.41
1.20
0.62
0.80
0.77
1.26
1.26
1.27
SCB
0.74
0.74
0.74
0.81
0.80
0.96
1.11
1.10
TMB
0.93
0.24
0.64
0.86
1.78
1.00
1.00
1.01
Sector
0.88
0.89
0.96
0.94
1.15
1.12
1.15
1.15
Source: Company reports and J.P. Morgan estimates.
38
Harsh Wardhan Modi (65) 6882- 2450 [email protected]
Asia Pacific Equity Research 16 July 2015
Table 69: ROA (%) 1Q14
2Q14
3Q14
4Q14
1Q15
2Q15E
3Q15E
4Q15E
BAY
1.11
1.17
1.17
1.29
1.23
1.13
1.28
1.35
BBL
1.38
1.41
1.49
1.31
1.35
0.96
0.92
0.78
KBANK
2.22
2.15
2.25
1.78
2.18
1.83
1.64
1.48
KTB
1.31
1.21
1.47
1.21
1.17
0.98
0.97
0.83
SCB
2.10
2.32
2.06
1.85
1.95
1.76
1.72
1.73
TMB
0.83
1.31
1.22
1.51
0.81
0.87
0.82
0.54
Sector
1.49
1.59
1.61
1.49
1.45
1.25
1.22
1.12
Source: Company reports and J.P. Morgan estimates.
Table 70: Asset/Equity (%) 1Q14
2Q14
3Q14
4Q14
1Q15
2Q15E
3Q15E
4Q15E
BAY
9.52
9.46
9.55
9.45
9.08
9.20
9.34
8.20
BBL
8.62
8.32
8.16
8.34
8.49
8.45
8.43
8.51
KBANK
10.20
9.91
9.78
9.50
9.24
9.07
8.89
8.80
KTB
11.97
11.74
11.57
11.62
11.92
12.09
12.04
11.72
SCB
9.97
9.68
9.66
9.54
9.25
9.00
8.85
8.82
TMB
12.32
12.36
11.99
11.57
11.45
11.21
11.11
11.21
Sector
10.43
10.24
10.12
10.00
9.90
9.84
9.77
9.54
Source: Company reports and J.P. Morgan estimates.
Table 71: ROE (%) 1Q14
2Q14
3Q14
4Q14
1Q15
2Q15E
3Q15E
4Q15E
BAY
10.62
11.13
11.16
12.21
11.18
10.38
11.94
11.08
BBL
11.94
11.69
12.16
10.96
11.50
8.09
7.75
6.61
KBANK
22.62
21.28
21.98
16.89
20.11
16.55
14.57
12.98
KTB
15.73
14.24
16.98
14.08
13.92
11.86
11.68
9.76
SCB
20.93
22.48
19.88
17.63
18.08
15.84
15.24
15.24
TMB
10.26
16.15
14.60
17.46
9.31
9.80
9.08
6.01
Sector
15.35
16.16
16.13
14.87
14.01
12.09
11.71
10.28
Source: Company reports and J.P. Morgan estimates.
39
Asia Pacific Equity Research 16 July 2015
Harsh Wardhan Modi (65) 6882- 2450 [email protected]
Bank of Ayudhya (BAY) We expect BAY’s income to grow 5% q/q to Bt 4,563 mn on the back of Non-II (+4% q/q) and significant decrease in loan provisions (-23% q/q). Margins are likely to contract in 2Q15 (-68bps q/q) resulting in meaningful decline in interest income (-5% q/q). BAY continues to strengthen its market position especially in low-end & high-yield consumer lending. Also, for the SME segment, the bank continues its attempt to expand more, especially into micro SMEs. Table 72: BAY: 2Q15 earnings preview PROFIT AND LOSS
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15E
YoY
QoQ
18,275 (6,778) 11,497 4,948 3,447 487 1,014 16,445 (8,306) 8,139 (4,084) 142 4,197 (894) 3,303 (36) 3,267
18,352 (6,476) 11,876 5,130 3,590 409 1,131 17,006 (8,476) 8,530 (4,255) 230 4,506 (1,005) 3,501 (41) 3,460
18,937 (6,730) 12,207 5,215 3,767 367 1,081 17,422 (8,559) 8,863 (4,889) 615 4,589 (1,036) 3,554 (47) 3,507
19,045 (6,681) 12,364 6,286 3,966 471 1,850 18,650 (8,959) 9,691 (4,879) 250 5,062 (1,097) 3,966 (30) 3,936
20,776 (6,919) 13,857 5,839 4,292 548 999 19,696 (9,321) 10,375 (5,253) 424 5,546 (1,166) 4,380 (53) 4,326
20,583 (7,380) 13,203 6,069 4,667 497 905 19,272 (9,380) 9,892 (4,055) 5,837 (1,227) 4,610 (47) 4,563
12% 14% 11% 18% 30% 21% -20% 13% 11% 16% -5% -100% 30% 22% 32% 15% 32%
-1% 7% -5% 4% 9% -9% -9% -2% 1% -5% -23% -100% 5% 5% 5% -12% 5%
Common Equity Gross Loans Net Loans Deposits NPL LLR
125,112 942,396 902,239 780,597 30,040 40,157
126,571 948,609 908,298 783,779 30,259 40,312
128,066 977,564 935,515 806,182 34,509 42,049
131,210 1,015,397 975,621 837,556 29,992 39,776
182,254 1,238,602 1,194,390 1,010,484 32,056 44,212
172,106 1,247,721 1,199,454 1,010,484 35,570 48,267
36% 32% 32% 29% 18% 20%
-6% 1% 0% 0% 11% 9%
NIM CIR LDR Credit Costs (bps) NPL Ratio Coverage Ratio CAR
4.15% 50.5% 120.7% 173 3.19% 134% 14.4%
4.25% 49.8% 121.0% 180 3.19% 133% 14.2%
4.28% 49.1% 121.3% 203 3.53% 122% 14.9%
4.27% 48.0% 121.2% 196 2.95% 133% 14.7%
4.11% 47.3% 122.6% 186 2.59% 138% 15.1%
3.43% 48.7% 123.5% 130 2.85% 136% 14.3%
Interest Income Interest Expense Net Interest Income Non-Interest Income Net Fee income Trading income Other operating income Total Revenues Costs PPOP Loan loss provisions Gains on disposals Pre-Tax Tax Profit before MI MI & EO Attributable profit
Change in bps
Source: Company reports and J.P. Morgan estimates.
40
(82) (117) 245 (50) (34) 247 1
(68) 134 90 (56) 26 (222) (81)
Asia Pacific Equity Research 16 July 2015
Harsh Wardhan Modi (65) 6882- 2450 [email protected]
Bangkok Bank Public Co Ltd (BBL) We expect BBL to report net income of Bt6,748 mn, down 25% y/y, down 28% q/q. We believe NIMs will be under pressure following interest rate cuts and high NPL formation (+3% q/q) will lead to a spike in loan provisions (+20% q/q). Loan growth is likely to be flat, while higher operating costs (+8 q/q) will weigh heavily on the profits. Volatility in global financial markets, negative political incidents and a potential rise in opex pressure can be some of the key downside risks for the stock. Table 73: BBL: 2Q15 earnings preview PROFIT AND LOSS Interest Income Interest Expense Net Interest Income Non-Interest Income Net Fee income Trading income Other operating income Total Revenues Costs PPOP Loan loss provisions Gains on disposals Pre-Tax Tax Profit before MI MI & EO Attributable profit Common Equity Gross Loans Net Loans Deposits NPL LLR
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15E
YoY
QoQ
25,834 (11,767) 14,067 8,186 5,206 1,951 1,029 22,253 (9,412) 12,841 (2,103) 485 11,223 (2,222) 9,001 (36) 8,965
25,796 (10,834) 14,962 8,237 5,283 1,462 1,492 23,199 (10,961) 12,238 (2,331) 1,046 10,953 (1,885) 9,068 (38) 9,029
25,550 (10,441) 15,109 7,839 5,486 1,269 1,085 22,948 (10,656) 12,292 (3,313) 3,093 12,073 (2,458) 9,615 (40) 9,575
26,300 (11,441) 14,859 7,527 5,752 1,072 703 22,386 (12,057) 10,328 (939) 1,447 10,836 (2,028) 8,808 (45) 8,763
26,589 (12,354) 14,235 9,605 6,394 1,745 1,466 23,840 (10,376) 13,463 (2,980) 1,209 11,693 (2,235) 9,457 (50) 9,407
25,656 (11,684) 13,972 8,197 5,600 1,524 1,074 22,170 (11,199) 10,970 (3,574) 1,000 8,397 (1,605) 6,792 (44) 6,748
-1% 8% -7% 0% 6% 4% -28% -4% 2% -10% 53% -4% -23% -15% -25% 15% -25%
-4% -5% -2% -15% -12% -13% -27% -7% 8% -19% 20% -17% -28% -28% -28% -13% -28%
306,799 1,749,452 1,654,881 1,932,921 45,017 94,571
313,095 1,767,971 1,670,765 1,903,432 45,021 97,207
318,834 1,744,652 1,653,242 1,919,357 46,142 91,410
323,491 1,786,466 1,694,541 2,058,779 45,068 91,925
333,829 1,777,692 1,687,539 2,117,969 47,532 90,153
336,759 1,786,840 1,691,780 2,135,213 48,865 95,060
8% 1% 1% 12% 9% -2%
1% 1% 0% 1% 3% 5%
2.20% 42.3% 90.5% 48 2.57% 210% 16.8%
2.35% 47.2% 92.9% 53 2.55% 216% 17.2%
2.37% 46.4% 90.9% 75 2.64% 198% 18.3%
2.26% 53.9% 86.8% 21 2.52% 204% 17.5%
2.08% 43.5% 83.9% 67 2.67% 190% 17.4%
2.00% 50.5% 83.7% 80 2.73% 195% 17.3%
Change in bps NIM CIR LDR Credit Costs (bps) NPL Ratio Coverage Ratio CAR
(35) 327 (920) 27 19 (2,138) 15
(8) 699 (25) 13 6 487 (3)
Source: Company reports and J.P. Morgan estimates.
41
Asia Pacific Equity Research 16 July 2015
Harsh Wardhan Modi (65) 6882- 2450 [email protected]
Kasikornbank Plc (KBANK) On the back of weak earnings momentum, we expect KBANK to report net income of Bt10.5 bn, down 11% y/y and down 15% q/q. This should be driven by deceleration in non-II (-4% q/q) mainly due to low trading income and meaningful increase in loan provisioning (+37% q/q) asset quality concerns. We forecast 1% q/q volume growth which will drive the net interest income. Some key catalysts to watch for include: 1) consistent downbeat guidance, 2) SME asset quality deterioration, 3) movement in interest rates, 4) Expected execution of government’s infra projects.
Table 74: KBANK: 2Q15 earnings preview PROFIT AND LOSS Interest Income Interest Expense Net Interest Income Non-Interest Income Net Fee income Trading income Other operating income Total Revenues Costs PPOP Loan loss provisions Gains on disposals Pre-Tax Tax Profit before MI MI & EO Attributable profit Common Equity Gross Loans Net Loans Deposits NPL LLR
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15E
YoY
QoQ
27,777 (8,283) 19,494 13,340 10,900 1,901 539 32,834 (13,247) 19,587 (3,660) 328 16,255 (3,237) 13,018 (1,080) 11,938
27,880 (7,300) 20,580 13,389 11,332 1,454 603 33,969 (15,137) 18,833 (3,036) 191 15,988 (3,265) 12,723 (991) 11,732
28,471 (7,177) 21,294 13,997 12,103 1,279 615 35,291 (14,954) 20,337 (3,661) 334 17,009 (3,368) 13,641 (1,124) 12,517
29,450 (7,686) 21,764 13,617 11,378 1,587 652 35,381 (18,080) 17,301 (3,886) 327 13,742 (2,822) 10,920 (954) 9,966
28,531 (7,556) 20,975 14,998 12,003 2,214 780 35,973 (15,417) 20,556 (4,007) 287 16,836 (3,321) 13,515 (1,114) 12,401
28,058 (6,840) 21,218 14,452 12,239 1,549 663 35,670 (15,855) 19,814 (5,483) 200 14,531 (2,906) 11,625 (1,139) 10,485
1% -6% 3% 8% 8% 7% 10% 5% 5% 5% 81% 5% -9% -11% -9% 15% -11%
-2% -9% 1% -4% 2% -30% -15% -1% 3% -4% 37% -30% -14% -12% -14% 2% -15%
231,688 1,452,778 1,406,143 1,553,899 34,001 46,635
237,383 1,474,526 1,426,377 1,567,499 34,334 48,149
248,814 1,503,905 1,454,048 1,621,056 35,161 49,857
257,059 1,530,105 1,479,113 1,629,831 36,207 50,992
269,437 1,551,187 1,498,212 1,653,391 38,039 52,975
278,726 1,566,666 1,506,657 1,677,768 40,366 60,009
17% 6% 6% 7% 18% 25%
3% 1% 1% 1% 6% 13%
3.61% 40.3% 93.5% 101 2.34% 137% 15.6%
3.75% 44.6% 94.1% 83 2.33% 140% 16.1%
3.79% 42.4% 92.8% 98 2.34% 142% 16.4%
3.85% 51.1% 93.9% 102 2.37% 141% 16.8%
3.67% 42.9% 93.8% 104 2.45% 139% 17.0%
3.61% 44.5% 93.4% 141 2.58% 149% 17.4%
Change in bps NIM CIR LDR Credit Costs (bps) NPL Ratio Coverage Ratio CAR
Source: Company reports and J.P. Morgan estimates.
42
(14) (11) (69) 58 25 843 137
(6) 159 (44) 37 12 940 42
Asia Pacific Equity Research 16 July 2015
Harsh Wardhan Modi (65) 6882- 2450 [email protected]
Krung Thai Bank Pub Co Ltd (KTB) We expect KTB to report net income of Bt7,128 mn (down 6% y/y, down 13% q/q). Key drivers come from: 1) Increase in loan loss provisions (+67% q/q) owing to higher NPL formation, 2) Contraction in margins (-12 bps q/q) leading to reduction in net-interest income (-1% q/q). We see the highest earnings risk for KTB if macro conditions weaken further. KTB’s NPL coverage is also the lowest among major banks. We believe that with ongoing business restructuring, KTB has higher opex pressure which will limit its ability to manage profitability.
Table 75: KTB: 2Q15 earnings preview PROFIT AND LOSS Interest Income Interest Expense Net Interest Income Non-Interest Income Net Fee income Trading income Other operating income Total Revenues Costs PPOP Loan loss provisions Gains on disposals Pre-Tax Tax Attributable profit Common Equity Gross Loans Net Loans Deposits NPL LLR
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15E
YoY
QoQ
28,926 (12,107) 16,820 6,448 3,900 1,948 599 23,267 (11,487) 11,780 (1,776) 84 10,089 (1,791) 8,297
29,388 (11,863) 17,525 7,119 4,130 2,158 831 24,644 (10,296) 14,348 (5,365) 179 9,163 (1,543) 7,620
29,621 (12,132) 17,489 6,873 4,012 2,183 677 24,362 (10,314) 14,048 (2,824) 11 11,235 (1,980) 9,255
30,690 (13,222) 17,468 7,234 4,281 2,335 617 24,702 (11,535) 13,167 (3,693) (40) 9,435 (1,411) 8,024
33,048 (13,710) 19,338 7,471 4,333 2,005 1,134 26,810 (13,166) 13,644 (3,724) 277 10,197 (1,978) 8,219
32,373 (13,225) 19,148 7,526 4,377 2,109 1,039 26,674 (11,858) 14,816 (6,216) 200 8,800 (1,672) 7,128
10% 11% 9% 6% 6% -2% 25% 8% 15% 3% 16% 11% -4% 8% -6%
-2% -4% -1% 1% 1% 5% -8% -1% -10% 9% 67% -28% -14% -15% -13%
215,794 1,770,440 1,706,845 1,962,582 62,548 63,595
212,349 1,813,247 1,743,101 1,867,456 62,319 70,146
223,590 1,804,349 1,731,539 1,903,139 67,746 72,811
232,153 1,903,186 1,832,040 2,151,641 56,460 71,146
240,355 1,957,869 1,879,052 2,196,566 68,328 78,817
240,492 1,989,150 1,904,117 2,218,532 70,286 85,033
13% 10% 9% 19% 13% 21%
0% 2% 1% 1% 3% 8%
2.77% 49.4% 90.2% 41 3.53% 102% 13.3%
2.88% 41.8% 97.1% 120 3.44% 113% 14.8%
2.85% 42.3% 94.8% 62 3.75% 107% 15.9%
2.73% 46.7% 88.5% 80 2.97% 126% 14.8%
2.87% 49.1% 89.1% 77 3.49% 115% 14.2%
2.74% 44.5% 89.7% 126 3.53% 121% 14.0%
Change in bps NIM CIR LDR Credit Costs (bps) NPL Ratio Coverage Ratio CAR
(14) 268 (744) 6 10 842 (78)
(12) (465) 53 49 4 563 (12)
Source: Company reports and J.P. Morgan estimates.
43
Asia Pacific Equity Research 16 July 2015
Harsh Wardhan Modi (65) 6882- 2450 [email protected]
Siam Commercial Bank Pub Co (SCB) We expect SCB to report net income of Bt 11.8 bn (down 20% y/y, down 10% q/q). This is mainly due to a decrease in trading income (-16% q/q), resulting in lower non-interest income (-3% q/q) and spike in the loan loss provisions (+21% q/q). We believe that markets will keep a close watch on further deterioration in corp and mortgage book quality and the bank’s ability to maintain cost efficiency. Table 76: SCB: 2Q15 earnings preview PROFIT AND LOSS Interest Income Interest Expense Net Interest Income Non-Interest Income Net Fee income Trading income Other operating income Total Revenues Costs PPOP Loan loss provisions Gains on disposals Pre-Tax Tax Profit before MI MI & EO Attributable profit Common Equity Gross Loans Net Loans Deposits NPL LLR
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15E
YoY
QoQ
30,581 (11,213) 19,368 11,392 9,070 1,881 441 30,760 (11,024) 19,736 (3,207) 117 16,646 (3,341) 13,306 (178) 13,128
30,622 (10,194) 20,428 10,989 8,409 2,025 554 31,417 (11,784) 19,633 (3,220) 2,179 18,592 (3,881) 14,711 12 14,723
31,002 (10,160) 20,842 10,753 8,874 1,410 469 31,595 (11,972) 19,623 (3,222) 214 16,615 (3,286) 13,329 (78) 13,252
31,176 (10,714) 20,462 11,333 9,110 1,909 314 31,795 (13,309) 18,486 (3,564) 53 14,974 (2,668) 12,306 (74) 12,232
31,028 (10,496) 20,532 11,758 8,914 2,335 509 32,290 (12,498) 19,792 (3,601) 252 16,443 (3,277) 13,166 (14) 13,152
29,967 (9,594) 20,373 11,388 8,914 1,964 510 31,761 (12,699) 19,062 (4,366) 200 14,897 (2,969) 11,928 (90) 11,838
-2% -6% 0% 4% 6% -3% -8% 1% 8% -3% 36% -91% -20% -24% -19% -856% -20%
-3% -9% -1% -3% 0% -16% 0% -2% 2% -4% 21% -21% -9% -9% -9% 525% -10%
260,542 1,738,565 1,679,015 1,789,505 40,312 59,550
263,156 1,736,372 1,677,214 1,781,355 42,003 59,158
272,381 1,728,604 1,669,354 1,834,501 42,003 59,250
285,332 1,780,949 1,721,935 1,895,343 42,798 59,014
297,198 1,813,608 1,753,994 1,865,491 43,214 59,614
303,937 1,838,177 1,773,290 1,881,417 44,574 64,887
15% 6% 6% 6% 6% 10%
2% 1% 1% 1% 3% 9%
3.20% 35.8% 97.2% 74 2.32% 148% 15.6%
3.34% 37.5% 97.5% 74 2.42% 141% 16.2%
3.35% 37.9% 94.2% 74 2.43% 141% 17.6%
3.22% 41.9% 94.0% 81 2.40% 138% 16.9%
3.18% 38.7% 97.2% 80 2.38% 138% 16.7%
3.13% 40.0% 97.7% 96 2.42% 146% 16.9%
Change in bps NIM CIR LDR Credit Costs (bps) NPL Ratio Coverage Ratio CAR
Source: Company reports and J.P. Morgan estimates.
44
(21) 247 23 22 1 473 72
(5) 128 48 16 4 762 22
Asia Pacific Equity Research 16 July 2015
Harsh Wardhan Modi (65) 6882- 2450 [email protected]
Tmb Bank Pcl (TMB) On the back of a weak economic environment, we expect TMB to report net income of Bt1,767 mn (down 31% y/y, up 8% q/q). This is primarily due to a significant decrease in loan loss provisions (-43% q/q), partially offset by a decrease in noninterest income (-10% q/q) and increasing operating costs (+15% q/q). 1Q15 credit cost at 178bp was extraordinarily high. We expect credit cost to remain high but at 100bp level. We are also wary of the SME loan book of the bank, which is causing higher NPLs.
Table 77: TMB: 2Q15 earnings preview PROFIT AND LOSS Interest Income Interest Expense Net Interest Income Non-Interest Income Net Fee income Trading income Other operating income Total Revenues Costs PPOP Loan loss provisions Pre-Tax Tax Profit before MI MI & EO Attributable profit Common Equity Gross Loans Net Loans Deposits NPL LLR
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15E
YoY
QoQ
8,734 (3,697) 5,037 1,765 1,136 533 96 6,802 (3,763) 3,039 (1,161) 1,905 (299) 1,606 (4) 1,602
8,935 (3,712) 5,223 1,917 1,346 460 111 7,140 (3,727) 3,412 (309) 3,221 (643) 2,578 (3) 2,574
9,109 (3,572) 5,537 2,151 1,575 424 151 7,688 (3,864) 3,823 (825) 3,001 (610) 2,390 (4) 2,387
9,070 (3,272) 5,798 2,384 1,677 575 132 8,182 (4,420) 3,763 (1,142) 2,616 362 2,977 (2) 2,975
8,935 (3,231) 5,704 2,197 1,688 410 99 7,901 (3,558) 4,342 (2,387) 2,019 (376) 1,643 (5) 1,638
8,804 (3,116) 5,688 1,984 1,413 460 111 7,672 (4,102) 3,570 (1,357) 2,213 (443) 1,771 (4) 1,767
-1% -16% 9% 4% 5% 0% 0% 7% 10% 5% 339% -31% -31% -31% 15% -31%
-1% -4% 0% -10% -16% 12% 12% -3% 15% -18% -43% 10% 18% 8% -13% 8%
63,397 501,740 469,525 558,584 23,285 32,216
64,261 510,587 480,780 572,997 20,777 29,807
66,652 527,126 497,810 568,470 21,027 29,316
69,704 531,429 503,066 571,625 18,093 28,362
71,331 539,995 511,210 581,707 19,190 28,785
73,098 542,628 512,486 587,524 20,135 30,142
14% 6% 7% 3% -3% 1%
2% 0% 0% 1% 5% 5%
2.82% 55.3% 89.8% 93 4.64% 138% 15.3%
2.84% 52.2% 89.1% 24 4.07% 143% 15.4%
3.03% 50.3% 92.7% 64 3.99% 139% 18.5%
3.14% 54.0% 93.0% 86 3.40% 157% 18.3%
3.00% 45.0% 92.8% 178 3.55% 150% 17.8%
2.96% 53.5% 92.4% 100 3.71% 150% 17.9%
Change in bps NIM CIR LDR Credit Costs (bps) NPL Ratio Coverage Ratio CAR
11 126 325 76 (36) 624 249
(5) 843 (47) (78) 16 (30) 12
Source: Company reports and J.P. Morgan estimates.
45
Harsh Wardhan Modi (65) 6882- 2450 [email protected]
Asia Pacific Equity Research 16 July 2015
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J.P. Morgan Global Equity Research Coverage IB clients* JPMS Equity Research Coverage IB clients*
Overweight (buy) 44% 51% 45% 71%
Neutral (hold) 43% 48% 47% 66%
Underweight (sell) 13% 38% 9% 57%
*Percentage of investment banking clients in each rating category. For purposes only of FINRA/NYSE ratings distribution rules, our Overweight rating falls into a buy rating category; our Neutral rating falls into a hold rating category; and our Underweight rating falls into a sell rating category. Please note that stocks with an NR designation are not included in the table above.
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Harsh Wardhan Modi (65) 6882- 2450 [email protected]
Asia Pacific Equity Research 16 July 2015
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