Thailand Banks-February loans:Starting to grow

Loans expanded by 0.4% MoM. The six banks under our coverage have releasedtheir February balance sheet data (see Fig 1). Loans expanded 0.4% MoM, driven bygrowth coming from businesses (corporate and SME). In terms of momentum, loansgrew vs January’s 0.8% MoM drop based on the month’s YoY growth rate of 3%,which is below our full-year forecast of 5%.

    SCB expanded the most. All the covered banks except TCAP saw loan growth inFebruary, with SCB expanding the most, by 0.98% MoM driven by growth in thecorporate segment. TCAP was the only bank that showed some contraction, at0.04% MoM mainly due to a decline in loans from the housing segment. Overall,consumer loans were either stable or saw a mild contraction MoM.

    Liquidity decreased slightly. LDR fell slightly, from 96% in January, to 95% inFebruary (see Fig 2) as total deposits grew by 1.0% vs. loans growth of 0.4%. Thedeposit base increased for all banks except KTB, which contracted mainly due to thematurity of fixed deposits in February.SCB saw the largest deposit inflow (+3%MoM), while KTB saw a deposit outflow (-2.5% MoM). Overall, deposits growth of1.0% MoM was driven by mixed expansion coming from CASA and Fixed deposits.

    Starting to grow, pick-up set to happen in 2He. Loans grew slightly in February,but momentum is expected to pick up in 2H17e, supported by a stable macro outlook(HSBC 2017e GDP forecast of 3.2% vs 2016’s 3.2%). In addition, the sector iscurrently trading at a 1.2x PB 2017e (10x PE 2017e) vs an ROE of 12%, which is notexpensive. Downside risks look fairly limited, given ongoing stability in the economyand PBT ROA continues to expand from 1.73% in 2016 to 2.02% by 2019e. The keycatalyst is improving macro indicators, which will help stabilize asset quality. Ourpreferred pick in the sector is Krung Thai, which we see as the biggest beneficiary ofpeaking NPLs and infrastructure projects.