Equity Analysis /

Thailand (Bualuang): Finance - Lending will drive 2022 profit growth

  • Strong consumer loan demand during periods of high inflation

  • NCAP and TIDLOR look set to lead earnings growth for 2022

  • Downside risk to forecasts if funding costs exceed assumptions …

Poramet Tongbua
Poramet Tongbua

Equity Research Analyst

Bualuang Securities
23 March 2022

Loan growth will drive finco profit expansion during 2022 in a climate of elevated inflation. We forecast an aggregate 2022 profit of Bt26.1bn, up 21% YoY. If funding costs were to rise (due to higher bond yields), there would be some downside risk to our base-case forecasts, but there’s also scope for upside from new lending businesses. Our NEUTRAL sector weighting stands. TIDLOR and NCAP are our top picks.

Strong consumer loan demand during periods of high inflation

Thai consumer loan demand tends to rise during periods of elevated inflation. The historical 2013-21 data show that consumer loan growth has a close mean correlation with the inflation trend of 73%. Thailand’s headline CPI was 5.28% in Feb, the fastest growth rate since Sep 2008. Hence, we expect consumer loan demand to expand this year, despite a high household debt/GDP ratio (HH debt/GDP ratio) of 90%.