Kasikornbank

Kasikornbank Plc (KBANK)

2Q12’s profit slightly better than expected, marching to make new quarterly high
KBANK announced net profit in 2Q12 at B9.37bn or the growth of 4.2%qoq
and 28%yoy, still making a new quarterly high as expected due to following
supporting factors. 1) Net interest income has risen by 3.7%qoq and
10.9%yoy. Although NIM has stayed flat from the prior quarter at 3.53%,
there have been supports from net loan in 2Q12 which has grown
significantly by 2.9%qoq mainly from corporate loan due to rising demands
for import loan for local investment. Meanwhile, SME and retail loans have
returned to grow significantly; although the growth is still lower than the
bank’s target for FY2012, it would become more aggressive in 2H12 which is
a high season. 2) Fee income has grown 8.3%qoq and 11.8%yoy,
mainly from loan and retail transactions particularly credit cards. However,
fee income growth in 1H12 stood at 12%yoy, still lower than FY2012’s target
of above 18%yoy, but there is nothing to worry because the growth would be
accelerated from now on, especially from fee income from SME and retail
loan transactions which are entering a high season. Although there is a
negative factor from rising cost of operation for K-transformation in this
quarter which has made cost to income ratio increase to 44.2%, in line with
the bank’s revelation that expenses would grow at an accelerated rate in the
rest quarters of the year, it has be entirely offset by much more positive
factors mentioned above. Consequently, net profit growth is still foreseen in
2Q12. Overall, net profit in 1H12 equated B18.3bn or the growth of 36.7%
from the same period last year, comprising 57% of our FY2012’s forecast.
 

Up forecast to reflect healthy earnings outlook in 2H12
We revise up our 2012-2013’s net profit forecast for KBANK by 12% and
14.1% respectively in order to reflect the growth of net interest income and
fee income which would be accelerated in 2H12 following loan transactions
which have grown robustly. Moreover, we have also increased our
assumption for NIM in 2012-2013 which we had previously underestimated.
After the revisions, net profit growth forecast for 2012-2013 increased to
49.3%yoy and 20.4%yoy respectively, higher than the sector’s average we
have estimated at only 28.5%yoy and 14.8%yoy respectively.

New fair value is B203. Reiterate BUY. To outperform continuously
We recommend buying KBANK. Fair value in 2012, using 2.70x PBV, is B203
(up from B200), implying 18% upside. Furthermore, since the beginning of
the year until now the share price has exhibited the highest increase among
peers by 36.1%, outperforming the sector and the market. We believe
earnings in 2H12 would still stabilize at a high level or make a new high,
while earnings forecast for 2012-2013 is a key driver for the share price of
KBANK to outperform the sector and the market continuously in the next 3
months.