1Q15 earnings below estimate; earnings cut possible
Krung Thai Bank Unrated (15E TP Bt26.00)
Earnings Review
Close Bt22.90
Banking April 22, 2015
Beat forecast/Below forecast/In line
1Q15 earnings below estimate; earnings cut possible
Cheap valuation could be its main share price support
Although we see KTB as one of the main gainers on the modest economic recovery, we see a greater chance of an earnings cut on a larger provision due to the bank’s higher asset quality risk. However, its inexpensive valuation (with 2015E P/BV of 1.1x vs. the sector average of 1.4x) could be its main share price support.
FY15
FY16
Consensus EPS (Bt)
2.599
2.909
KT ZMICO vs. consensus Share data
‐1.1%
‐0.7%
Reuters / Bloomberg
KTB.BK/KTB TB
Paid‐up Shares (m)
13,976.06
Par (Bt)
5.15
Market cap (Bt bn / US$ m)
320.00/9,890.00
Foreign limit / actual (%)
25.00/17.56
52 week High / Low (Bt)
24.50/17.60
Avg. daily T/O (shares 000) NVDR (%)
44,916.00 5.13
Estimated free float (%)
44.93
Beta
1.06
URL
www.ktb.co.th
CGR
Note: KT•ZMICO is a partnership between KTB and ZMICO
1Q15 net profit below our forecast and the street KTB’s 1Q15 net profit (NP) of Bt7.9bn (‐5% YoY, ‐2% QoQ) was below both our forecast and the street estimate of Bt8.5bn. The lower‐than‐ expected NP was due largely to a higher‐than‐expected provision due to its higher NPLs. 1Q15 net profit weakened 5% YoY and 2% QoQ The weaker NP was due largely to 1) higher provision and operating expenses both YoY and QoQ; and 2) lower NIM YoY. Meanwhile, loans still grew favorably by 11% YoY and 3% QoQ and non‐interest income improved quite well by 14% YoY and 6% QoQ. Note that excluding KTC’s provision (~Bt1bn/quarter), the bank only set a slight extra provision of ~Bt500mn on top of its normal level of ~ Bt2.1bn/quarter. This did not match with its much higher NPLs QoQ. Therefore, we expect a higher provision in the remaining quarters. Started to consolidate KTC in 1Q15 from equity method previously Note that starting in 1Q15 KTB began combining Krungthai Card Pcl. (KTC) on a consolidated basis (instead of using the equity method as previously) based on TFRS 10 accounting standard. While this change will not impact the bank’s bottom line, it has resulted mainly in a higher non‐ interest income (Non‐NII) base, which grew 14% YoY in 1Q15 largely on the 11% growth of net fee income YoY (vs. around
Earnings Review
Close Bt22.90
Banking April 22, 2015
Beat forecast/Below forecast/In line
1Q15 earnings below estimate; earnings cut possible
Cheap valuation could be its main share price support
Although we see KTB as one of the main gainers on the modest economic recovery, we see a greater chance of an earnings cut on a larger provision due to the bank’s higher asset quality risk. However, its inexpensive valuation (with 2015E P/BV of 1.1x vs. the sector average of 1.4x) could be its main share price support.
FY15
FY16
Consensus EPS (Bt)
2.599
2.909
KT ZMICO vs. consensus Share data
‐1.1%
‐0.7%
Reuters / Bloomberg
KTB.BK/KTB TB
Paid‐up Shares (m)
13,976.06
Par (Bt)
5.15
Market cap (Bt bn / US$ m)
320.00/9,890.00
Foreign limit / actual (%)
25.00/17.56
52 week High / Low (Bt)
24.50/17.60
Avg. daily T/O (shares 000) NVDR (%)
44,916.00 5.13
Estimated free float (%)
44.93
Beta
1.06
URL
www.ktb.co.th
CGR
Note: KT•ZMICO is a partnership between KTB and ZMICO
1Q15 net profit below our forecast and the street KTB’s 1Q15 net profit (NP) of Bt7.9bn (‐5% YoY, ‐2% QoQ) was below both our forecast and the street estimate of Bt8.5bn. The lower‐than‐ expected NP was due largely to a higher‐than‐expected provision due to its higher NPLs. 1Q15 net profit weakened 5% YoY and 2% QoQ The weaker NP was due largely to 1) higher provision and operating expenses both YoY and QoQ; and 2) lower NIM YoY. Meanwhile, loans still grew favorably by 11% YoY and 3% QoQ and non‐interest income improved quite well by 14% YoY and 6% QoQ. Note that excluding KTC’s provision (~Bt1bn/quarter), the bank only set a slight extra provision of ~Bt500mn on top of its normal level of ~ Bt2.1bn/quarter. This did not match with its much higher NPLs QoQ. Therefore, we expect a higher provision in the remaining quarters. Started to consolidate KTC in 1Q15 from equity method previously Note that starting in 1Q15 KTB began combining Krungthai Card Pcl. (KTC) on a consolidated basis (instead of using the equity method as previously) based on TFRS 10 accounting standard. While this change will not impact the bank’s bottom line, it has resulted mainly in a higher non‐ interest income (Non‐NII) base, which grew 14% YoY in 1Q15 largely on the 11% growth of net fee income YoY (vs. around
