BAY – 3Q24: Weak, as expected

In line with expectations, BAY’s 3Q24 results showed a slight rise in NPLs with a QoQ ease in credit cost, contracting loans, narrowed NIM, QoQ stable non-NII and QoQ rising cost to income ratio. We expect earnings to be flattish in 4Q24 and 2025 and stay Neutral with an unchanged TP of Bt29.

3Q24: In line with expectations. BAY reported 3Q24 net profit of Bt7.67bn (-7% QoQ, -5% YoY), in line with our estimates.

Highlights:

Asset quality: NPLs rose 2% QoQ (+19%, if write-offs and NPL sales are added back), mainly from the retail and SME segments. Credit cost eased 9 bps QoQ (+48 bps YoY) to 2.28%. LLR coverage slipped to 121% from 125% at 2Q24.
Loan growth: -3.3% QoQ, -4.5% YoY, -4.5% YTD.
NIM: -5 bps QoQ on a 16 bps QoQ fall in yield on earning assets and an 11 bps QoQ ease in cost of funds.
Non-NII: -1% QoQ (+18% YoY). Net fee income slipped 2% QoQ (+28% YoY, mainly from overseas businesses acquired in 2023).
Cost to income ratio: +106 bps QoQ (-59 bps YoY) to 45.14%. Opex came down 1% QoQ (+7% YoY).

4Q24 and 2025 earnings outlook. 9M24 earnings accounted for 75% of our full-year forecast (-6%). In 4Q24, we expect earnings to be essentially flat QoQ and YoY, followed by flat earnings in 2025. We expect 2025 to show 3% loan growth, a 7 bps narrowing in NIM, 4% growth in non-NII, a 10 bps reduction in credit cost and rising cost to income ratio.

Maintain Neutral with unchanged TP. We maintain our Neutral rating with an unchanged TP of Bt29 (0.5x 2025F BVPS).

Key risks: 1) Asset quality risk from an uneven economic recovery, 2) slower loan growth than expected from sluggish loan demand, and 3) ESG risk from market conduct and cyber security.