Kasikornbank

Kasikornbank Plc (KBANK)

Investment thesis
We maintain our BUY rating on KBANK, premised on: 1) continuing loan growth of 9-11% next year, 2) well managed NIM, 3) good asset quality management—a low NPLs/loans ratio of 2.07% and a high loan loss coverage ratio of 143%—and 4) rising operating efficiency, which will bring down its FY13 cost/income ratio down from this year. Our FY12 and FY13 earnings projections are Bt34.2bn and Bt43.9bn, respectively. We are positive about KBANK’s FY13 outlook, driven by rising private and public spending. There is likely to be scope for lending growth upside.

Moderate lending growth target range of 9-11% for FY13
KBANK said 4Q12 loans will post further QoQ growth, led by the retail and corporate categories. The bank also targets FY13 loan growth of 9-11% (close to this year). Corporate business is set to rise 4-6% next year, SME by 10-12% and retail loans by 10-13% (we model for FY13 loan growth of 10%). We also project 4Q12 lending expansion of 5% QoQ and 12% YTD, driven by the retail and SME categories.

Promising FY13 NIM target of 3.4-3.6%
Because of KBANK’s emphasis on high-yield retail and SME lending, the bank forecasts that its NIM will fatten from 3.4-3.5% in FY12 to 3.4-3.6% next year. Management also expects the policy interest rate to fall to 2.5% at YE13. Note that its SME loans comprised 35% of the total loan portfolio at end-September, followed by retail loans at 22%. The bank plans FY13 loan loss provisions of Bt2bn/quarter (in line with our assumption). We model for NIMs of 3.41% for FY12 and 3.55% for FY13.

FY13 cost/income ratio target range of 45-46%
KBANK has set an FY13 net fee income growth goal of 15% YoY (from over 18% for this year). The lower growth target is due mainly to the larger base effect. Given sustained lending expansion momentum, a good NIM, rising fee income and well-managed OPEX, KBANK guides for an FY13 cost/income ratio of 45-46%, down from the FY12 target of 46.5%. Note that we project FY12 and FY13 cost/income ratios of 46% and 44%, respectively.

CAR adequate to accommodate FY13 business expansion
KBANK had a big capital adequacy of 16.53% (10.9% Tier-1) at end-September. The bank clearly won’t need to make a cash call next year. Given moderate growth in high-yield assets and well-managed OPEX, the bank expects to maintain its core Tier-1 ratio at above 9%. Note that KBANK doesn’t plan to cut its dividend payout.