Maybank Sees Struggling Thai Banks in 2019, Ditching All Banks Except BBL, TISCO, KKP

Maybank Securities forecasts a difficult 2019 for Thai banks, with loan growth and operating income coming in below market expectations, and rising asset quality issues further pulling down the bottom line.

Maybank expects a risk-off period where safety may become as important as growth; from this angle, Maybank gives a BUY recommendation for a conservative corporate bank like BBL. For shorter-term plays with high yields and strong ROEs, Maybank prefers TISCO (BUY) and KKP (BUY), auto hire purchase banks riding continued growth in vehicle sales, which is believed could be maintained at least through 1H19.

Operating earnings could be under pressure
Thai banks will be pressured on operating earnings in 2019. While fiscal spending-driven corporate loan growth should hold up, and continued vehicle sales strength should support retail auto, SME loan growth is near zero. Maybank also sees rising risks for mortgage lending, given a sluggish property market.

Despite Bank of Thailand’s (BoT) recent hike in the benchmark rate, there is still little room for NIM expansion, and expect fee income growth will be low at best, with little relief from any decline in costs.

Asset-quality issues may persist
With SMEs still struggling, and the property market sluggish, Maybank believes asset-quality issues could persist, with NPLs rising. Banks are likely to become more cautious and boost LLR/NPLs levels, which will further hit earnings, in contrast to the current consensus, which implies that asset quality should improve in 2019.

Safety may become more of a consideration
After a decade of risk on, and a market preference for growth banks like SCB and KBANK, Maybank believes 2019 may see more of a premium for safety, for which conservative BBL will be the prime pick.

For more speculative plays, Maybank also prefers TISCO and KKP, beneficiaries of the last still strongly-growing loan segment, retail auto, which by expectation can hold until at least through 1H19, while high ROEs versus the sector and sector-high yields offer a share-price backstop. Maybank recommends SELL on all the other banks under its coverage; SCB, KBANK, KTB, TMB, and TCAP.