Trinity Secs. Rate Banking Sector “Outperform” on Potential Upside-Profit Rebound in 1Q

Trinity Securities said the total 1QF net profit of 6 banking stocks under its under coverage was 37,762 million baht, up 40% QoQ and 4% YoY. The best performer was BBL as its QoQ basic jumped 189% due to the level of expected credit losses (ECL), followed by TMB and SCB (+125% QoQ and +103% QoQ, respectively).

 

The main catalysts for better-than-expected profit growth were capital valuation gains and fee income, driven by the improved capital market conditions and the asset quality is likely to improve. Together with an effective cost control and lower level of provisions. The group’s NPL dropped around 4 bps, while net interest income (NII) remained flat despite rising loans by 1% QoQ, but NIM fell 4 bps QoQ.

 

The third wave of Covid-19 outbreak could pressure banking’s 2Q21F slightly, but, overall, the sector is still on a continued positive recovery path. The pandemic resurgence will force banks to increase their ECL amid an uncertain situation. However, Trinity believed it would not be as bad as last year. Revenue from fees tends to decline in 2QF as the market shows sign of slowdown. 

 

With an impressive upside, Trinity raised its rating on Thai banking sector to “Outperform” and the price is still laggard. Hence, recommending “BUY” on BBL (TP: ฿151), KTB (TP: ฿14), KBANK (TP: ฿158), TISCO (TP: ฿106) and TMB (TP: ฿1.3).