BBL – 3Q26: Miss on opex but beat on NII

BBL’s 3Q26 results missed INVX and consensus forecasts due to higher-than-expected opex. The results showed a pickup in loan growth, a substantial rise in NIM, easing NPLs and credit costs, softer non-NII on all fronts, and a worse-than-expected cost-to-income ratio. We cut our 2026F earnings forecast by 6%, mainly on higher opex and lower FVTPL gains. We maintain BBL at Outperform with an unchanged mid-2027 TP of Bt220, underwritten by the fact that it is best positioned to benefit from the return of Thailand's investment cycle and a decent dividend yield.

3Q26: Miss on opex. 3Q26 net profit was Bt9.5bn (flat QoQ, -31% YoY), below INVX forecast by 12% and consensus forecast by 5%. The deviation was due to higher-than-expected opex. However, we are impressed with a 5% QoQ rise in NII, driven by a recovery in loan growth and a substantial rise in NIM. Highlights are summarized below.

1) Asset quality: NPL ratio decreased 11 bps QoQ in 3Q26. Credit cost eased 7 bps QoQ (-27 bps YoY) to 1.19%. LLR coverage (including interbank and money market lending) rose to 322% from 306% in 2Q26 (based on the bank’s calculations).

2) Loan growth: +0.5% QoQ, +3.3% YoY, +3.2% YTD, mainly from corporate and international loans.

3) NIM: +10 bps QoQ (-22 bps YoY), better than expectation. Yield on earning assets rose 14 bps QoQ. Cost of funds rose 5 bps QoQ.

4) Non-NII: -8% QoQ (-31% YoY), mainly due to smaller FVTPL gains and lower fee income. Net fee income fell 3% QoQ but rose 3% YoY.

5) Cost to income ratio: +107 bps QoQ, +705 bps YoY to 50.52%, worse than anticipated. Opex rose 3% QoQ (-1% YoY), due to expenses related to operational efficiency enhancement.

Cut 2026F earnings. We cut our 2026F earnings forecast by 6%, mainly on higher opex and lower FVTPL gains. We now expect 2026F earnings to fall 14%, underpinned by 3% loan growth, a 24 bps narrowing in NIM, a 6 bps easing in credit cost, an 11% decrease in non-NII (lower FVTPL and investment gains), and tighter opex.

Decent dividend yield. We expect BBL to sustain 2026F DPS at Bt10 (48% payout), equivalent to 5.5% dividend yield.

Maintain OUTPERFORM with an unchanged TP. We keep BBL as OUTPERFORM with an unchanged TP of Bt220 (based on DDM), underwritten by the fact it is best positioned to benefit from a return of Thailand's investment cycle and decent dividend yield.

Key risks: 1) Asset quality risk from economic slowing and geopolitical tension, 2) NIM risk from cuts in interest rates, 3) ESG risk from market conduct and 4) cyber security.