Krung Thai Bank

Krung Thai Bank Plc (KTB)

KTB will soon get its new president. Given his work credentials, Mr Vorapak Tanyawong is the positive pick for shareholders. The case for him is cemented by his declared vision to expand retail and SME lending and boost its fee income base to peer standards. We still see KTB as an Outperformer. Stronger earnings post recapitalising should lead to a re-rating. Our target price stays pegged to our target FY12 P/BV of 1.6x, derived from GGM assuming 14.5% long-term ROE, 11.7% COE and 7.2% growth. The stock remains our sector favourite alongside TCAP. 
What Happened
KTB’s selection committee has picked Mr Vorapak Tanyawong to succeed Mr Apisak Tantivorawong as the bank’s president. The latter’s second four-year term ends in November.
What We Think
Given his strong credentials, we believe Mr Vorapak is a favourable choice for KTB’s shareholders. Before the official appointment, there are further formalities. After settling employment terms, the bank will submit his name for the approval of the Bank of Thailand. The whole process should be completed before Mr Apisak steps down in November. Mr Apisak is leaving behind a much-improved banking operation one that could achieve much more with continued capable leadership.
Our only reservation about the incoming president is if he can familiarise himself with KTB’s
working culture or change its culture to suit his preference. Mr Apisak had spent years at two state-owned banks before joining KTB but running a state enterprise would be a totally new experience for Mr Vorapak. That said, future developments look promising. In his pitch to the selection committee, Mr Vorapak addressed his vision to 1) shift KTB’s focus towards more profitable retail
and SME lending, and 2) boost its fee income generation closer to peers.His vast banking experience should come in handy.
What You Should Do

Trim other big banks, particularly BBL, and add KTB. Apart from its attractive value, KTB has multiple re-rating ingredients. These include potential for stronger loan growth post recapitalisation, more profitable loan mix prospects and higher profit contributions from associates.