Kasikorn Bank
Growth topping the sector's BUY
Kasikorn Bank Plc (KBANK)
and 2% QoQ to Bt11.9bn, based on the following 3Q14 guidance.
1. Loan growth: +5% YTD in 9M14, indicating QoQ loan growth of ~2.6% in 3Q14 from
1.5% QoQ in 2Q14.
2. NIM: Stable or up QoQ from 3.76% at 2Q14.
3. Non-NII: In line with the full-year target of growth in the low teens.
4. Cost to income ratio: Stable QoQ at >40% before a seasonal rise in 4Q14.
5. Asset quality: QoQ rise in credit cost close to 90 bps from 83 bps for 2Q14. NPLs are
expected to edge up QoQ.
Outperforming loan growth; raise our 2014F to 8% from 6% earlier in recognition
of its continued strength in growing its loans, notably SME loans. 8M14 loan growth is
3.4% vs. 1.7% for the sector, with 6.5% growth in SME loans, 2.5% in corporate loans and
2.2% in retail loans. The last quarter of the year typically is a high season for working
capital loans, particularly SME loans to which KBANK has the highest exposure. We
expect loans to continue to grow from 1.5% QoQ in 2Q14 to 2.6% QoQ in 3Q14F and 3%
QoQ in 4Q14F.
Raised provision target slightly. KBANK raised 2014 provision target to 0.85-0.9% of
total loans from the original target of 0.85%. This reflects its dynamic loan mix and
prudence rather than worsened asset quality. In fact, NPL formation is under control,
in line with its estimates; it noted that it expects a small rise in NPLs in 2H14. To fine
tune with the bank’s new target, we raised our 2014F provisions to 0.88% of total loans
from 0.85%. We maintain our expectation of a reduction in credit cost to 0.75% in
2015F as a result of the economic recovery and over-provisioning in 2014F.
Maintain as top Buy with unchanged TP, underpinned by its outstanding loan and
non-NII growth plus a lower cost to income ratio after completion of the IT upgrade
next year, solidifying L-T value. We keep its target price unchanged at Bt250,
equivalent to 2.1x mid-2015F BVPS, based on 19.3% L-T ROE, 12.3% cost of equity and
6% L-T growth.
