Nomura Equity Research raised 2013-14 forecast earnings for Thai banks by 2-3 percent and target prices by 4 percent, citing higher net interest margins that reflected a stable policy rate backdrop and amid signs that state banks are slowing expansions.
"Thai bank margins have been under pressure since 2008 against the backdrop of lower policy rates, aggressive state bank competition in the deposit market and weak loan pricing power," the broker said in a report.
"However, with the recent move by the central bank to hold rates, our view is that the next move is likely up," it said.
The broker said it expects the margins to rise 21 basis points from 2012-15F, reversing a 26 basis points drop from 2008-12.
State bank lending has slowed sharply since mid-2011. Asset quality issues are expected to further cap growth for the state-owned banks.
The broker raised price target for Bangkok Bank Pcl to 270 baht from 262 baht and for Krung Thai Bank Pcl to 31.25 baht from 27.5 baht.
It raised price target for Kasikornbank Pcl to 247 baht from 241 baht. The broker also raised price target for Siam Commercial Bank Pcl to 201 baht from 200 baht.
Among mid-sized and small banks, it upgraded price target for TMB Bank Pcl to 2.8 baht, Kiatnakin Bank Pcl to 61 baht, Thanachart Capital Pcl to 40 baht and Tisco Financial Group Pcl to 48 baht.
The banking subindex had rallied 43.5 percent since Feb. 20 when the Bank of Thailand left its benchmark interest rate unchanged at 2.75 percent. The broader SET index had gained 37 percent for the same period.
1221 (0521 GMT)
(Reporting by Viparat Jantraprap in Bangkok; Editing by Bijoy Koyitty)
11:01 STOCKS NEWS THAILAND-CIMB raises 2013 SET index target to 1,700
CIMB upgraded its target for Thailand's benchmark SET index .SETI for 2013 to 1,700 from 1,500, saying favourable domestic factors such as strong corporate earnings and political stability justified higher valuations.
The higher index target of 1,700 meant Thai stocks trading at 13.2 times their forecast 2014 earnings, on par with regional peers, the broker said.
The SET index was down 0.17 percent at 1,556.72, in line with weaknesses in broader Asia. MKTS/GLOB It had risen 11.92 percent so far this year and is Asia's sixth best performing bourse.
"We believe that Thai corporate earnings will continue to grow strongly this year on the back of higher private consumption and investment and higher public investments," the broker said in a report dated March 6.
"With greater political stability, we believe the government can devote its attention to the implementation of various infrastructure projects," it said.
The broker has an 'overweight' rating on domestic sectors such as property, hospital, hotel and retail. Its underweight-rated sectors included oil & gas, mining and technology due to global economic and political uncertainties.
1041 (0341 GMT)
(Reporting by Viparat Jantraprap in Bangkok; Editing by Sunil Nair)