BAM - 3Q24: As weak as expected

In line with our preview, BAM’s 3Q24 reflected YoY lower cash collection on both NPLs and NPAs, larger gain on NPLs but smaller gain on NPAs. We expect 2H24 earnings to rise minimally HoH and YoY, with 4Q24F growing both YoY and QoQ (on seasonality) on expectation of higher cash collection. We stay Underperform with an unchanged TP of Bt7 due to weaker purchasing power as a result of high loan rejection rates by banks.

3Q24: As weak as expected. BAM reported 3Q24 earnings of Bt199mn (-48% YoY, -56% QoQ), in line with our estimates.

Highlights:

1) Total cash collection decreased 12% YoY and 14% QoQ to Bt3.42bn in 3Q24, in line with our preview. Cash collection on NPLs rose 1% YoY and 10% QoQ to Bt2.16bn and on NPAs fell 27% YoY and 37% QoQ to Bt1.26bn (of which Bt583mn was one-and-done payments). We maintain our 2024 cash collection growth at merely 1%, expecting a seasonal QoQ rise in 4Q24.

2) Interest income rose 13% YoY and 4% QoQ in 3Q24, with +15% YoY and +11% QoQ in the cash portion and +12 YoY and -1% QoQ in the accrual portion.

3) Gain on NPLs rose 13% YoY but fell 12% QoQ in 3Q24. Gross margin on cash collection on NPLs rose 300 bps YoY but fell 681 bps QoQ. Gain on NPAs fell 14% YoY and 25% QoQ in 3Q24 with a fall in gross margin on cash collection on NPAs (-28 bps YoY, -466 bps QoQ). This reflected an unfavorable property market with high mortgage rejection rates by banks.

4) Cost of funds rose 14 bps YoY and 3 bps QoQ to 3.54% in 3Q24.

5) Credit cost (excluding accrued interest) rose 105 bps YoY and 3 bps QoQ to 0.22% in 3Q24 due to a purchase of collateral from the Legal Execution Department or debt settlement by collateral transfer, on which the full amount of remaining cost must be reserved.

6) Cost to income ratio came down 231 bps YoY but rose 155 bps QoQ to 23.05% in 3Q24 with a decrease in opex of 8% YoY and 2% QoQ.

Earnings outlook. 9M24 earnings account for 69% of our full-year forecast. We expect 4Q24F earnings to rise both YoY and QoQ (on seasonality) as we expect higher cash collection.

Underperform with unchanged TP. We stay Underperform with an unchanged TP of Bt7 (based on DDM).

Key risks: 1) Cash collection risk from a slower-than-expected and uneven economic recovery, 2) a slowdown in property market demand and 3) rising competition from new players with irrational bidding prices.