Kasikornbank

Kasikornbank Plc (KBANK)
- 4Q14 profit to shrink from increasing expenses
We estimate 4Q14 net profit at B11.4bn, contracting 8.8%qoq yet growing
19.8%yoy. Operating expenses are projected to rise on seasonal effect, while
provisioning for doubtful debts would increase following growing NPLs, though
not significantly. Since positive factors from a projected increase in net
interest income and fee income would not be able to compensate for the
aforementioned adverse effects, an earnings decline is anticipated in this
quarter. FY2014 net profit is estimated at B47.6bn, growing 15.2%yoy but
3% lower than our current forecast.
- Keep 2015 target conservative
KBANK expects FY2015 GDP growth at 4.0%, versus 1.6% projected for
FY2014, in line with the estimates by other economists. Major driving factors
are government and private investments as well as exports that would revive
following the world economic rebound and from the low base in 2014.
Accordingly, the bank targets for improved performance in 2015; net loan
growth is expected at 8-9%yoy, up from lower than 8%yoy in 2014, boosted
by corporate and SME loans. NIM is projected to rise slightly from the target
in 2014 to 3.5-3.7%, while fee income would help increase non-interest
income growth above 15%yoy. The bank still aims at keeping its cost to
income ratio at not over 45%, close to that of the prior year.
- Top pick of big banks
We recommend BUY. 2015 fair value (GGM, based on 2.45x PBV and 20%
long-term ROE forecast) is B301.20; total returns (dividend included) can be
expected over 31% at end-2015. Given its strength of good loan structure
and diversified income base, especially for fee income that has been very
strong and lower investment expense, the bank’s profitability would become
better.