SETBANK

On September 5, 2019, the US 10-year bond yield rose more than 6% after Wall Street edged higher in response of the renewal trade talks between the U.S. and China that is expected to be held in early October as well as the better than expected U.S. economic data. In the meantime, the tension in Hong Kong started to ease as Chief Executive Carrie Lam officially announced the withdrawal of the extradition bill. The push of 6% in 10-Y bond was from the rise of Dow Jones in the previous night to close at 26,355.47, increased 0.91% while S&P 500 rose 1.08% and Nasdaq gained 1.30%. The rise of bond yield is a reflection of investors leaving a safe asset to invest in something riskier such as stock markets that is performing better. The US Bank Index gained 2.46% on September 5. US Bank - 10Y Bond As one of the items listed on the bottom line of each bank’s investment income, banking sector tends to receive positive sentiment whenever the bond yield goes up, which is one of the safest assets that bank always invests in. The same situation also occurred to Thai bond yield and SETBANK, though not having an impact as much as the U.S. Thai 10-Y bond yield rose only 1.37% on September 5 and rose 2.1% on September 6. Meanwhile. SETBANK also started to gain as well. On September 5 and 6, SETBANK gained 0.73% and 0.40%, respectively. SETBANK - 10Y Bond According to the data from the bottom line of top four Thai banks, SCB’s investment income rose from 14,217 million baht in 2017 to 14,706 million baht in 2018. KBANK’s investment income rose from 18,811 million baht in 2017 to 20,309 million baht in 2018. BBL’s investment income rose from 12,029 million baht in 2017 to 12,980 million baht in 2018. However, KTB’s investment income dropped from 4,825 million baht in 2017 to 4,585 million baht in 2018. Despite the plummet of profit in the first half of 2019, the consensus still sees a full-year profit growth for the top four bank. SCB’s FY19E profit is 42,129 million baht, increasing 5.15% YoY. KBANK’s FY19E profit is 39,954 million baht, increasing 3.89% YoY. BBL’s FY19E profit is 37,057 million baht, increasing 4.89%, and KTB’s FY19E profit is 29,663 million baht, increasing 4.11%. SCB has a 27% upside from a consensus target price at ฿147.32/share with a P/E of 10.46 and a dividend yield of 4.74%. KBANK has a 28.12% upside from a consensus target price at ฿203.06/share with a P/E of 10.32 and a dividend yield of 2.52%. BBL has a 30.09% upside from a consensus target price at ฿218.55/share with a P/E of 9.03 and a dividend yield of 3.87%. Lastly, KTB has a 16.16% upside from a consensus target price at ฿20.10/share with a P/E of 8.24 and a dividend yield of 4.15%. Out of all four shares, BBL has the highest upside, but looking at the current status and in the near future, the most interesting one here is in fact SCB, the one that just made a record of closing at ฿116.00/share on Friday, September 6, 2019, a new low in three years and eight months, raised an alarm to all investors in the market. However, SCB still has the highest dividend yield among top four banks at 4.74%. More importantly, the deal of selling SCBLIFE to FWD is expected to be completed this year and SCB will book 92.7 billion baht from the deal which has been confirmed that there will be a special dividend paying to shareholders. Analysts expect the special dividend could be as high as ฿27.0/share. From a total of 27 analysts, 17 recommend “Buy”, 9 recommend “Hold” and 1 recommends “Sell”. This might be the opportunity to scoop the share at the lowest price in almost four years along with a dividend yield at 4.74% and a special dividend as high as ฿27.0/share! In addition, it is very interesting to speculate if SETBANK will react as much as the U.S. bank or not, and will SETBANK be able to rebound after facing a huge drop of profit in the first half of 2019.