Bangkok Bank to benefit from Thailand's first-ever SME loan cycle since 1997

SME loans accounts for 90% of its loan book.

According to Nomura, a capex and corporate/SME loan cycle is developing in Thailand for the first time since the 1997 financial crisis. BBL is likely a key beneficiary of this backdrop given that corporate and SME loans accounts for 90% of its loan book (versus an industry average of 67%); its domestic market share in this segment stood at 20.3% in 2012, up from 19.0% in 2009.

Here's more from Nomura:

This in turn should drive its strongest earnings cycle in 20 years (ie, since 1991- 94) and see BBL re-rate significantly. Our target price of THB262 is based 12.9x 2013F earnings of THB20.3 and 1.7x 2013F book of THB155.6 (methodology unchanged).

In 1994, BBL traded on 12x earnings and a P/B of 2.6x. We justify a P/E premium to the level in 1994 given BBL’s much stronger capital base (asset-equity gearing of 8.7x in 2012, versus 11.5x in 1994) and loan loss reserve position (5.5% of loans in 2012, versus 2.9% in 1994).