Equity Analysis /

Bank of Ayudhya PCL: Conservative 2H20 business plan

  • 2020 loan growth assumption remains 5-7%

  • If credit cost peg rises, so will LLPs in 2H20

  • Cost/income ratio likely to rise slightly, led by IT spending

Bualuang Securities
13 August 2020

There is downside risk to BAY’s 2H20 earnings profile from the possibility of heavier LLPs and OPEX than modeled. However, the stock trades at a YE20 PBV of just 0.6x—far below its long-term mean of 1.3x—and we expect fair dividend yields of 3.0% for 2020 and 3.5% for 2021. We, thus, reiterate our HOLD rating.

2020 loan growth assumption remains 5-7%

The bank’s 2020 loan growth target range is 5-7%, following 2% YTD expansion, led by SME business (up 3.3% YTD). In 2H20, BAY will focus on the retail and SME categories to propagate growth. So our 2020 loan growth assumption stands at 3%. Its NIM target range is 3.4-3.6% (we assume 3.3%, due to BOT-requested debt-rescheduling).

BAY said that loans under the BOT-requested rescheduling program comprise about 29% of its portfolio (around Bt540bn)—automotive HP 39%, SME 30%, mortgages 12%, corporate 11% and credit card & personal loans 8%. The loans were rescheduled for six months and the bank expects 70-80% to resume normal servicing. The remaining 20-30% will be restructured or foreclosed on, we presume.