Equity Analysis /

Thai:Finance-How much would an HP rate ceiling squeeze Finance coverage profits?

  • The earnings growth driver is lending expansion

  • BAM and KTC wouldn’t be affected by HP interest rate ceiling

  • Other proposed measures would be negative

Poramet Tongbua
Poramet Tongbua

Equity Research Analyst

Bualuang Securities
3 December 2021

We forecast aggregate Finance coverage (five stocks) earnings growth of 11% YoY for 2021 and 17% YoY for 2022. But we have run a scenario analysis of the possible impact of a proposed HP interest rate ceiling of 15% for 2022. Our model suggests that if the fincos were to tighten HP approval standards in order to mitigate risk at a 15% rate ceiling, our aggregate 2022 profit forecast would be squeezed by not more than 0.7%. TIDLOR is our top pick.

The earnings growth driver is lending expansion

We forecast a Finance (finco & AMC) coverage aggregate 2021 profit of Bt21.4bn, up 11% YoY. KTC, SAWAD, and TIDLOR should set new records for this year—respective YoY bottom-line rises of 9%, 8%, and 32%. We expect BAM to mark a strong profit rebound of 28% YoY after a weak 2020 (a 72% YoY dive), but MTC’s NPAT looks set to be flattish. The 2021 earnings growth drivers of TIDLOR and SAWAD are lending expansion (driven by new sales points and TIDLOR’s card) and rising other income (chiefly insurance brokerage). We expect KTC’s profit growth to be driven by LLPs (despite additional LLPs tied to KTBL, post-acquisition) and BAM’s to be led by lighter LLPs, increased cash collection, and sales of NPAs.