Kasikornbank

Kasiskorn Plc (KBANK)

KBANK guided for healthy 3Q12 results although we do not expect this quarterly profit to mark a new high. Management remains confident of achieving its FY12 loan growth target of 9-11% despite lagging growth YTD but flagged a seasonal spike in 4Q opex. With an ROE uptrend, we maintain our Outperform call and target price, set at 2.7x FY12 P/BV, derived from GGM assuming 17% ROE, 11.7% COE and 8.5% growth. Although KTB is our large-bank favourite for a 12-month timeframe, we still see KBANK as a quality long-term core holding among the Thai banks. 

What Happened
During its briefing, KBANK’s management updated analysts on its businesses and provided guidance on the upcoming quarterly results. From end-2011 to end-August, KBANK’s loan book expanded 5.5%. During this period, retail loans grew the most (+9.1%), followed by corporate loans (+4.9%) and SME loans (3.8%). Although loan growth is lagging behind, management
reinstated its full-year loan growth target of 9-11%, citing year-end seasonality. It also gave assurances on the bank’s overall asset quality, including that of its SME accounts despite market concerns over their recovery from the flood crisis and the impact of wage hikes.

In other areas, management guided for sustained high-teens yoy growth in non-interest income in 3Q12. NIM widened slightly qoq, thanks to higher loan yields and lower funding costs. Cost-to-income was stable qoq but is likely to spike in 4Q12 due to year-end spending. On a prudential
basis, loan loss provision in 3Q12 could rise to THB2bn versus an average THB1.86bn per quarter
booked in 1H12.
What We Think
We expect KBANK to report a 3Q12 net profit of THB9,217m, down 2% qoq but up 19% yoy. If this is accurate, 9M12 profit will reach 77% of our full-year forecast, implying a year-low net profit in 4Q12 on the assumption of an opex spike. These would still allow KBANK to boast a year of
strong earnings growth and ROE expansion.

What You Should Do
Keep KBANK as the core holding for the sector. Add TCAP and KTB as near-term positions, the funding of which is from selling BBL.