Bangkok Bank's provisioning expenses up 60% to US$342m

Credit cost is expected to remain elevated.

Maybank Kim Eng reports that weak 2Q17 results, which saw gross NPLs rise by 11% QoQ, suggest that credit cost may be elevated against management’s previous expectation. 

Here's more from Maybank Kim Eng:

We raise our FY17 credit cost projection by 30bps to 1.2%, the main change this time. Management previously guided that FY17 provisioning expenses should be the same level as FY16E of THB16b.

However, 1H17 provisioning expenses rose by 60% and now already recorded THB11.5b (US$342m). BBL’s gross NPL rose faster than others in 1H17 (partially because the bank barely writes off its bad debts) and we do not expect a significant improvement in 2H17. Thus, credit cost should remain elevated. We also slightly cut our opex projection to reflect low opex in 1H17.

2Q17 earnings were below our expectation by 4% (but in line with consensus) due to disappointedly elevated provisioning expenses (fell only 2% QoQ). However, the provisions could have been even higher, considering the fact that NPL surged by 30bps to 4.34%. We also note that income tax was usually low in 2Q17. Effective tax rate was only 14.6%, the lowest in 5 years. The earnings could have been much worse otherwise.