DAOL Securities maintains an “Overweight” rating on the Thai banking sector, spurred by the robust fundamentals observed within their covered stocks. Despite a mixed outlook for the third quarter of 2024, the analyst expresses a buoyant perspective on the long-term viability of the sector.
Expected net profits for 3Q24 are estimated to rise by 3% year-over-year to Bt52 billion, mainly propelled by specific tax advantages amounting to approximately Bt1.1 billion for TTB, alongside increased fee-based income for KTB and reduced provisions for KBANK.
Conversely, the sector is anticipated to experience a 3% quarter-over-quarter decline in investment gains due to seasonal fluctuations. Yet, SCB distinguishes itself with expectations for both quarter-over-quarter and year-over-year profit growths (5% YoY and 1% QoQ), notably through a Bt400 million gain from the divestment of Robinhood, while positive year-over-year profits are also foreseen for TTB (13% increase), KBANK (7% increase), and KTB (6% increase).
On the other hand, TISCO and BBL are expected to see declines in both quarter-over-quarter and year-over-year profits, attributed to diminished investment gains.
Total loans are projected to decrease by 2% year-over-year and 1% quarter-over-quarter, mainly due to repayments from sizable business and government sectors. Additionally, the non-performing loan (NPL) ratio is expected to rise modestly to 3.19% from 3.13% in Q2, considered to be at a manageable level.
Looking forward to the full years of 2024 and 2025, the aggregate net profit forecasts remain fixed at Bt205 billion (a 5% increase from the previous year) and Bt217 billion (a further 6% increase), respectively. A notable reduction in loan-loss provisions is anticipated, expected to drop by 10% following a 17% increase in 2023, with a significant 50 basis points cut in the policy rate predicted by the first half of 2025.
SETBANK has exhibited a robust performance, appreciating by 6% over the past three months and 13% over six months, bolstered by substantial capital inflows into Thai equities.
Within this optimistic framework, DAOL Securities choose KBANK and KTB as top-pick stocks, giving them ‘BUY’ ratings and target prices of Bt176.00 and Bt23.00, respectively, following KBANK’s enhanced asset quality and appealing valuation, along with KTB’s projected leading net profit growth of 15% in 2024, driven by lower provisioning and a focus on lower-risk state lending.
