Bangkok Bank's NPL ratio hits 4.04% in 1Q17

Gross NPLs rose 13% to US$258m.

According to Maybank Kim Eng, the 50bps increase in NPLs in 1Q17 should lead to market concerns over the bank’s credit quality. This, is in addition to the disappointing earnings (6% below consensus), may lead to some profit taking by investors after the 12% rise in the share price YTD. 

Here's more from Maybank Kim Eng:

For 1Q17, the key talking point should be the deterioration in the bank’s asset quality. Gross NPLs rose 13% QoQ to about THB8.9b (US$258m), pushing the NPL ratio up by 50bps to 4.04%. The bank said that the overall economic recovery appears gradual, reducing borrowers’ debt-servicing ability, but it did not disclose which segments the NPLs came from.

We believe it might have come from some large corporates like what happened with KTB as their loan book structure appears similar. The rise in NPLs forced the bank to substantially raise the provisioning expenses by 61% QoQ to THB5.8b. This was the main reason for the earnings disappointment.

1Q17 operations remained sluggish. Loans fell by 1% QoQ, leading to a 0.2% decline in net interest income. The slowdown in trading income caused non-interest income to fall 1% QoQ. Positive reading was seen in opex, which fell by 15% QoQ.

However, the bank said this was due to the decline in provisions for contingencies. Therefore, we believe this improvement may be unsustainable.