Krung Thai Bank
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Waiting for growth in 2nd half 2015 BUY
Krung Thai Bank Plc (KTB)
- Profit to improve in 1Q15. Bad debt provision increases
We estimate 1Q15 net profit at B8.49bn, rising 5.9%qoq and 2.4%yoy as a result of decreasing allowance for bad debts after passing the forth quarter in which banks usually make extraordinary high debts provision. We project debt provision of KTB to be higher than the policy level (B700m/month) in this quarter because the bank has to be cautious in asset quality control amidst the current economic sluggishness. However, excluding such items, normalized profit would stabilize from the previous quarter as a result of decreasing loans and deposits. NIM is projected to shrink from the prior quarter due to an impact from higher cost deposits raised in 4Q14, an impact from a loan rate cut in March 2015, and decreasing fee income after passing a high season of retail and transactional banking businesses. Nevertheless, lower operating expense after the high season is still a benefit. Overall, we project net profit to improve in this quarter.
- Too early to cut loan growth forecast
KTB admitted that it may have to revise down its 2015 loan growth forecast from 6-7%yoy in the present following decreasing GDP growth forecast from the current level of 3.9%-4.5%. However, KTB’s loans normally grow at an accelerated rate in the second half of a year and the bank’s loan growth targets in the past few years were lower than the actual growth, so we believe our net loan growth forecast of 10%yoy is still reasonable. We are not likely to slash our 2015 loan growth and earnings forecasts soon; net profit growth is estimated at 10.1%yoy in 2015, slightly higher than the sector’s average, and 11.0%yoy in 2016.
- Top pick of the sector
We reiterate BUY for KTB and select it as another top pick of the sector together with KBANK. 2015 fair value (GGM, based on 1.61x PBV and long-term ROE forecast of 16.5%) is B29. PBV of the current share price still has a discount from the sector average. Additionally, KTB provides the highest dividend yield among big banks at 4-5%p.a.
