Kasikornbank

Kasikornbank Plc (KBANK)

As a big commercial bank with diversified loan structure, KBANK
would revive and grow aggressively in 2H14 if the economy
rebounds. Moreover, KBANK's fee income is high. We might revise
up our FY2014 earnings forecast in the near future.

- Weak profit foreseen in 2Q14, but net loan starts growing
We estimate KBANK's net profit at B1.14bn, contracting 3.8%qoq but rising
4.6%yoy. Non-interest income (Fx gain, capital gain, and net income from
insurance business) is expected to decrease significantly. Fee income would
also decline, mainly from bancassurance. Operating cost is projected to
increase. Cost to income ratio would be as high as 42%. KBANK has already
revealed that its expenses would increase significantly for the remainder of
2014 due to seasonal effect. 2Q14 net interest income would grow because
net loan growth (corporate, SME, and retail) has rebounded. 2Q14 NIM is
projected to stay at 3.55%. NPL is likely to increase (but not worrying),
mainly from SME loan. 2Q14 debt provision expense is expected to drop
15.3%qoq; credit cost is projected to decrease from 101bp in 1Q14 to 83bp
in 2Q14.
- Upside expected for 2H14 earnings
The economy is anticipated to revive in 2H14, so KBANK's FY2014 net loan
growth is likely to surpass our forecast of 6%yoy. Preliminarily, we
projected 2H14 NIM at 3.51% (lower than nearly 3.60% expected in 1H14)
and credit cost at 100bp (higher than 90bp expected in 1H14). Overall, we
might revise up FY2014 earnings forecast.
- Buy amidst economic rebound
We recommend BUY for KBANK. FY2014 fair value (GGM, 2.15x PBV, 18.5%
long-term ROE forecast) is B223, with over 11% return (including dividend).
After the economy rebounds, we recommend investing on KBANK for its
diversified income base and high fee income.