On Saturday, UBS adjusted its stance on Bangkok Bank PCL (BBL:TB) (OTC: BGKKF), downgrading the stock from Buy to Neutral and revising the price target downward to THB144.00 from the previous THB155.00. The revision comes amid expectations of a prolonged period of high interest rates, which could potentially impair asset quality and slow down the rebuilding of the bank's Common Equity Tier 1 (CET1) capital.
The firm anticipates that the challenging interest rate environment will result in Bangkok Bank's return on equity (ROE) and dividend payout ratio remaining below that of its peers. This situation is expected to cause the bank's shares to be valued at a discount compared to other banks in the region, thereby capping the potential for valuation growth.
The updated forecast takes into account UBS's latest economic outlook, which does not foresee any policy rate cuts in Thailand for the year 2024. The firm's analysts have raised their Net Interest Margin (NIM) forecast accordingly, but they also caution that the extended cycle of high interest rates could lead to greater-than-expected deterioration in asset quality.
The UBS report indicates that the bank's slower pace in rebuilding its CET1—a key measure of a bank's financial strength—could be a drag on its performance. With the revised price target, UBS has reduced its expectation for Bangkok Bank's stock price by approximately 7%, from the prior target of THB155 to the new target of THB144.
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