Kasikornbank

Kasikornbank Plc (KBANK) 

 

- Cut forecast to reflect adjusted business target 

We revise down 2015-2016 earnings forecast respectively by 4.7% and 12.0% to reflect KBANK’s 2015 adjusted business target announced on October 24 (increasing credit cost) and 2016 firstly announced business target (stable loan growth, slightly decreasing NIM, slower non-interest income growth, and increasing credit cost and NPL), as shown in the table. A forecast of income from other operations is revised up because we had underestimated net income from insurance underwriting, but the positive factor was negated by a projection for increasing debt provision expense and credit cost and decreasing net loan growth. According to the new forecast, KBANK’s net profit is projected to weaken 13.5%yoy in 2015 but grow 8.1%yoy in 2016. 

- Cooperate loans, major driver in 2016 

Based on 2016 net loan target, an increasing growth is foreseen from corporate loans (thus making 2016 NIM weaken slightly), mostly long-term loans for investment, international trade finance, plus increasing loan demands from contractors and construction material companies and ICT companies. Retail loans would show similar growth to that in 2015, except SME loans would grow at a slower pace, reflecting decelerating domestic consumption, while growth would be seen from those focusing on international trade, which has benefited from AEC and FTA liberalization. 

- Very limited downside for 2016 profit 

After the forecast revision, new 2016 fair value is B240 (GGM, based on PBV of 1.79x and long-term ROE forecast of 14.5%). Although 2015-2016 earnings have a very limited downside, in the short-term the share price would still be depressed, so buy on weakness is recommended.