Bangkok Bank's 0.4% loan contraction pulled NII down

Lower NIM made it slip harder.

Bangkok Bank's 1Q15 EPS was up 5% YoY and 7% QoQ as non-NII grew 25% YoY and 20% QoQ.

According to a research note from Maybank Kim Eng, this was aided by higher fee income and investment gains.

On the other hand, NII slipped 4% QoQ from a 0.4% MoM loan contraction and lower NIM of 2.08%. The NIM weakness stemmed from an 11bp drop in earning-asset yields and a 7bp increase in funding costs.

Opex grew 10% YoY, above Maybank Kim Eng's 6% FY15 forecast. PPoP grew 10% YoY and 25% QoQ, beating Maybank Kim Eng's forecast.

Here's more from Maybank Kim Eng:

NPLs rose 5.5% QoQ, lifting its NPL ratio by 15bp QoQ to 2.68%. NPL coverage also fell to 190% from 204% in 4Q14.

Excluding THB4.8bn of write-offs, NPLs jumped 16% QoQ. We believe most of the bad loans came from SMEs.

Asset quality for all the large banks has been compromised by the economic slowdown. Provisions jumped 41% YoY to THB3bn or 67bp of credit costs in 1Q15 vs our 48bp fullyear forecast.

Results were a mixed bag of strong non-NII, weak NIM and high NPLs. We are not that anxious about its weakening asset quality, given its conservative loan mix and healthy NPL coverage.

We still expect catalysts from its fee-income growth.