Kasikorn Bank

Kasikorn Bank Plc (KBANK)

In a cautious mode on provisioning. At the analyst meeting on Friday, KBANK’s president said he sees the banking environment as increasingly volatile. For this reason, the bank prefers to set aside high countercyclical provisions in good years as a buffer against future uncertainty, which means credit cost in 2014 will remain high. Although NPLs remain under control, banks - including KBANK – are aware that the risk level for banks is rising, hence a move into higher-risk higher-return segments.
Balancing between loan growth and capital preservation. KBANK’s president noted several times that the bank will balance loan growth and capital preservation. To preserve capital, optimal loan growth will be in the high-single digits. Its capital adequacy ratio will be hit little by a phased-in deduction of intangible assets under Basel III. Its tier-1 capital adequacy ratio was 12.5% as of 3Q13. We estimate that the deduction of intangible assets will in total reduce CAR by around 1 percentage point.   
2014F guidance. There is little change from 2013F: 1) stable 9-11% loan growth;
2) lower non-interest income growth expectations to “up to mid-teens” from 2013’s “mid-teens”; 3) stable net interest margin at 3.4-3.6%; 4) stable cost to income ratio at mid-40%; 5) continued high provisions at 0.85% of total loans; 6) NPL ratio below 2.2%.