KTBST Rates Banking Sector “Neutral” on High BIS Ratio and No Share Buyback Required

KTBST Rates Thai Banking “Neutral” on High BIS Ratio and No Share Buyback Required.

KTB Securities (Thailand) (KTBST) had a “Neutral” view on the banking sector on the move that the Bank of Thailand ordered banks to suspend interim dividend and share buyback programs.


Last Friday, The Bank of Thailand asked financial institutions to preserve capital due to economic woes by the COVID-19 pandemic. In particular, commercial banks have been ordered to suspend their interim dividend and share buyback program this year.


KTBST raised concern over the country’s economic situation, as the BOT asked the financial institutions to suspend interim dividends and shares buyback program this year to preserve their capital reserves, although the banks’ BIS capital ratio remains a high of 17-21%, which is well above the BOT’s required level of 12%.

Such an announcement may trigger profit-taking in bank stocks, including BBL, KBANK, SCB, and KKP, that have a track record of paying interim dividends. KTBST estimated a dividend yield to decrease by 0.5-3.4% in 2020E. KKP’s share price looks likely to suffer the largest decline, followed by SCB, BBL, and KBANK.


However, KTBST did not expect any negative impact from the suspension of the share buyback program, as KBANK and TCAP’s shares buyback programs already finished while SCB earlier canceled the program. On a valuation basis, KTBST saw no impact on the forecast.


In addition, KTBST maintained a “Neutral” rating on the banking sector. Among its covered bank stocks, TISCO (HOLD, target price of Bt88.00) is unlikely to be affected from the BOT’s moves (interim dividend suspension and a cut in credit card and personal loan’s interest rates), as the bank neither paid an interim dividend in the past, nor has credit card.