Equity Analysis /

Thailand: Finance - Improving macro-economic indicators

  • Macro-economic indicators suggest improving asset quality …

  • …and loan growth (especially credit card spending)

  • 3Q22 and 2022 coverage earnings projected to rise YoY

Poramet Tongbua
Poramet Tongbua

Equity Research Analyst

Bualuang Securities
16 September 2022

There have been market concerns over the 2H22 NPL and LLP outlooks for fincos. But a number of macro-economic indicators suggest that asset quality is improving. Several of the fincos under coverage (excluding AMC businesses and NCAP) trade at cheap valuations (2022 PERs ranging 16-22x), so we maintain BUY calls on all our finco stocks except NCAP. Our NEUTRAL sector weighting stands.

Macro-economic indicators suggest improving asset quality …

The market has been worried about the NPL and LLP trends of fincos for some time, as their clients’ debt-servicing capacity looked weak in 2Q22 (rising living costs squeezed effective spending power and some fincos had relaxed loan approval standards in order to accelerate loan growth—the effect of intensified competition). But several macro-economic indicators lead us to believe that private consumption is rising: 1) the Consumption Index increased from 134.1 in May 2022 to 142.0 in July and 2) the Farm Income Index increased from 176.8 in June 2022 to 177.5 in July.