Kiatnakin Bank

Kiatnakin Bank Plc (KK)
Earnings fell 10% short of estimate
KKP reported a 3Q13 profit of Bt990m, up 7% YoY but down 20% QoQ. The result was 10% lower than our estimate and 11% short of the Bloomberg consensus, attributable mainly to an extra loss of Bt402m on the sale of foreclosed (repossessed) used cars during the quarter. However, 9M13 earnings jumped 46% YoY to Bt3.4bn, which represents 72% of our FY13 projection of Bt4.7bn.
Results highlights
Lending rose by 2.3% QoQ and 16.0% YoY to Bt210bn (driven by construction-linked SME loans), in line with our forecast. NIM was 3.64%, up 27 bps YoY. 3Q13 fee income jumped 44% YoY but dived 28% QoQ to Bt990m. Note that in 2Q13, KKP booked about Bt400m in financial advisory and underwriting fees related to the IPO of BTS Rail Mass Transit Growth Infrastructure Fund (BTSGIF).
The bank holding company set loan loss provisions of Bt343m for the 3Q13, down by 20% YoY and 54% QoQ. Its NPLs/loans ratio was 3.5% at end-September, unchanged from three months earlier, while its loan loss coverage ratio rose negligibly to 109.7% from 109.5% at end-June.
Outlook
We expect KKP to post QoQ profit growth for 4Q13 because there shouldn’t be a repeat of the extra loss from sales of repossessed used cars in that quarter. Furthermore, the capital markets have been improving recently after dropping in 3Q13 on concerns over the state of the domestic economy and anticipation that the US Federal Reserve might reduce the scale of quantitative easing (it didn’t and won’t for some time). Besides, KKP has more big ticket IPO deals lined up for next year.
What’s changed?
We maintain our FY13 earnings forecast of Bt4.7bn unchanged for the moment.
Recommendation
Given the recovering outlook for both lending and the capital market for 4Q13 and next year, we expect KKP to post good earnings for the quarters ahead. The stock currently offers attractive dividend yields of 5.6% for FY13 and 6.2% for FY14. Our TRADING BUY rating stands.