Bangkok Bank net interest income grew 6% QoQ in 2Q14

Thanks to sharp decline in funding costs.

Thailand-based Bangkok Bank registered 1 percent QoQ and zero loan growth YTD in 2Q14, although net interest income did grow that period by 6 percent QoQ, thanks to the sharp decline in funding costs.

According to a research note from Maybank Kim Eng, hence, NIM edged up by 15bp QoQ to 2.35 percent due to the lower deposit base, the expiration of fixed deposits and higher LDR of 93 percent.

Non-interest income grew 7 percent QoQ, due mainly to the seasonality of high divident income.

OPEX increased by 16 percent QoQ due to the network expansion.

Here's more from Maybank Kim Eng:

Cost to income ratio increased to 45% from 41% in 1Q14.

PPoP was flat QoQ at THB13b, in line with our forecast but fell 17% YoY due to the extra income from the reversal of losses from the assets transferred in 2Q13.

Asset quality remains strong. NPL ratio fell to 2.55% from 2.58% in 1Q14 with higher coverage ratio of 216%.

The bank set aside THB2.3b provision expenses (52bps credit cost vs our forecast of 49bps).

Cheap but lacking near term catalyst. BBL is trading at undemanding valuations of 10x 2014PE, 1.2xP/BV and 12%ROE.

However, we think the weak earnings momentum could cap BBL's potential upside.

We expect LDR ratio to drop to 91% from 93% in 2Q14.

This could limit the NIM expansion.