Kasikorn Bank

Kasikorn Bank Plc (KBANK) 

 

Positive surprise on top lines exceeded negative surprise on asset quality. Its 2Q15 net profit fell 2% YoY and 7% to Bt11.5bn, 11% above our forecast of Bt10.4bn. The discrepancy came from stronger non-NII than expected (+23% YoY, higher than its guidance of low teens) and a smaller squeeze on NIM than expected (-8 bps QoQ vs. the guidance of a more than 10 bps fall). Asset quality continued worsening with a 13% or Bt4.8bn QoQ rise in NPLs, a rise in credit cost to 154 bps from 104 in 1Q15, higher than the guidance of 120 bps, and a slide in LLR coverage to 138% from 140%. In line with expectation, loan growth was 1.2% QoQ and 2.6% YTD.      

Rising provision and opex in 2H15. Although 1H15 earnings accounted for 58% of our full-year forecast, we leave it unchanged (-11%) as we expect it to make higher provisions in second half than in first as well as higher opex in 2H15. Loan growth is expected to continue in 2H15 to achieve our 6% full-year forecast (vs. 2.6% YTD). Upbeat 17% YoY growth in non-NII gives upside risk to our full-year forecast of 13%.  

Maintain Buy, on its outstanding loan and non-NII growth plus a lower cost to income ratio after completion of the IT upgrade in 2015, solidifying L-T value.