KASIKORNBANK Outperform
KASIKORNBANK Outperform (16E TP Bt200.00)
Earnings Review
Close Bt187.50
Banking October 21, 2015
Beat forecast/Below forecast/In line
3Q15 net profit quite in line but core profit slightly above forecast Price Performance (%)
Source: SET Smart
FY15
FY16
Consensus EPS (Bt)
17.659
20.283
KT ZMICO vs. consensus Share data
-5.3%
-11.3%
Reuters / Bloomberg
KBANK.BK/KBANK TB 2,393.26
Paid‐up Shares (m)
10.00
Par (Bt)
449.00/12,673.00
Market cap (Bt bn / US$ m)
48.98/48.97
Foreign limit / actual (%)
252.00/163.50
52 week High / Low (Bt)
6,799.00
Avg. daily T/O (shares 000) NVDR (%)
24.13
Estimated free float (%)
78.45
Beta
1.10
URL
www.kasikornbank.com
CGR
Level 4 (Certified)
Anti‐corruption
Prapharas Nonthapiboon Analyst, no 17836 [email protected] 66 (0) 2695‐5872
Switch to Outperform on solid core earnings and sound balance sheet We switch our rating to Outperform from Underperform as we see some potential upside risk to our earnings forecasts, especially for 2015E on the bank’s solid non‐interest income. Moreover, its balance sheet remains quite solid vs. direct peers, which should enable the bank to be in a better position to deal with the macro headwinds. 3Q15 results quite in line with our forecast and the street KBANK posted 3Q15 net profit (NP) of Bt10.1bn (‐19% YoY, ‐12% QoQ) quite in line with our forecast of Bt9.6bn and the consensus estimate of Bt10.3bn. Meanwhile, its core profit was slightly ahead of our forecast by 8‐9% mainly on higher‐than‐expected gain on trading and FX transactions and NIM as well as lower‐than‐expected operating expenses. 3Q15 net profit stood at Bt10.1bn (‐19% YoY, ‐12% QoQ) The main reasons behind the NP drop were lower NIM and a higher provision both YoY and QoQ on higher NPLs. The bank set aside a much higher provision of 190 bps in 3Q15 (vs. 98 bps in 3Q14 and 154 bps in 2Q15), keeping the total provision for 9M15 at 149 bps in line with the bank’s latest guidance of ~150bps for FY15. Meanwhile, loans for 3Q15 grew modestly by 0.7% QoQ and 3.3% YTD vs. our forecast of +5% and the bank’s target of 3% for 2016E. However, the bank set a higher provision in 3Q15, resulting in a higher reserve to the BoT’s required reserve QoQ to 186% from 181%, which remained solid vs. several peers (e.g., BBL 217%, SCB 113%, TMB 180%, TCAP 153%, TISCO 122% and KKP 155%). Meanwhile, its reserve‐ to‐NPL ratio was down slightly QoQ to 132% from 138% but still higher than the sector average (excluding BBL) at ~110%. Possible upside risk to 2015E earnings The 9M15 net profit represented 85% of our FY15E forecast, therefore we see slight upside risk to our 2015E earnings forecast on its solid non‐ interest income and slightly higher NIM. We will revisit our earnings forecasts after the analyst meeting set for 2 Nov‐15, at which the bank will also give the 2016E business guidance. Financials and Valuation FY Ended 31 Dec PPOP (Btm) Provision (Btm) Net profit (Btm) EPS (Bt) EPS growth (%) Book value (Bt) Dividend (Bt) FY Ended 31 Dec PER (X) PBV (X) Dividend yield (%) ROE (%)
2013 56,067 11,743 41,325 17.27 17% 91.60 3.50 2013 10.86 2.05 1.87 20%
2014 63,365 14,243 46,153 19.28 12% 107.41 4.00 2014 9.72 1.75 2.13 19%
2015E 67,827 24,052 40,019 16.72 ‐13% 120.13 4.00 2015E 11.21 1.56 2.13 15%
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 1 of 4
2016E 74,307 26,939 43,043 17.99 8% 134.12 4.50 2016E 10.43 1.40 2.40 14%
2017E 81,081 27,023 49,422 20.65 15% 150.27 5.00 2017E 9.08 1.25 2.67 15%
Figure 1: 3Q15 earnings results Statement of comprehensive income (Btmn) Fiscal Year-Ended Dec.
3Q14
2Q15
3Q15 % YoY % QoQ
9M14
9M15 % YoY
2015E % YoY % 9M to 15E
Net Interest Income
21,294
21,119
21,094
-1%
0%
61,368
63,188
3%
82,032
-1%
Non Interest Income
14,331
16,637
16,051
12%
-4%
41,579
47,972
15%
64,254
16%
75%
Operating Income
35,624
37,756
37,145
4%
-2% 102,947
111,160
8% 146,286
6%
76%
Operating Expenses
14,954
15,947
15,460
3%
-3%
43,339
46,824
8%
66,266
8%
71%
Operating Profit
20,336
21,642
21,442
5%
-1%
58,756
63,675
8%
80,020
4%
80%
Provision Expenses (Reversal)
3,661
6,037
7,507
105%
24%
10,357
17,550
69%
24,052
69%
73%
Tax Expenses
3,368
2,924
2,743
-19%
-6%
9,870
8,987
-9%
11,194
-12%
80%
Net Profit
12,516
11,479
10,117
-19%
-12%
36,187
33,997
-6%
40,019
-13%
85%
PPOP-after tax
16,968
18,718
18,699
10%
0%
48,886
54,641
12%
67,827
7%
81%
EPS (Bt)
5.23
4.80
4.23
-19%
-12%
15.12
14.25
-6%
16.72
-13%
85%
Key Statistics & Ratios
3Q14
2Q15
3Q15
9M14
9M15
Gross NPLs (Btmn)
35,013
Gross NPLs/Loans
40,841
2.16%
Loan Loss Reserve/NPLs
46,035
35,013
77%
2015E
46,035
49,969
2.39%
2.62%
2.16%
2.62%
2.85%
142.4% 138.1%
131.6%
142.4%
131.6%
127.4% 14.6%
Tier I/Risk Assets
14.0%
13.8%
14.6%
14.0%
14.6%
C apital Adequacy Ratio
17.0%
17.4%
17.7%
17.0%
17.7%
17.2%
Loan to Deposit Ratio
92.6%
93.9%
94.1%
92.6%
94.1%
92.1%
Loan to Deposit & borrowing
88.6%
89.4%
89.8%
88.6%
89.8%
87.7%
Provision to loans
0.98%
1.54%
1.90%
0.94%
1.49%
1.50%
C ost to Income
42.0%
42.2%
41.6%
42.1%
42.1%
45.3%
Non Interest Income/Total Income
40.2%
44.1%
43.2%
40.4%
43.2%
43.9%
Net Interest Margin
3.79%
3.60%
3.57%
3.72%
3.62%
3.55%
Tax rate
19.8%
18.5%
19.3%
20.7%
19.26%
20.0%
Loan Growth YoY
6.2%
6.4%
5.1%
6.2%
5.1%
5.0%
Loan Growth QoQ
2.0%
1.2%
0.7%
2.0%
0.7%
Source: KTZMICO Research
Figure 2: KBANK's P/BV band and sensitivity of market prices based on P/BV at different standard deviation levels (X)
2015E
3.1 2.6
+2 S.D. +1 S.D.
2.1
+0.5 S.D. Avg. -0.5 S.D. -1 S.D.
1.6
-2 S.D.
1.1
Oct-15
Nov-14
May-15
May-14
Jun-13
Dec-13
Jul-12
Jan-13
Feb-12
Mar-11
Source: Bloomberg, KT ZMICO Research
Aug-11
Sep-10
Oct-09
Mar-10
Apr-09
Nov-08
Dec-07
May-08
Jan-07
Jun-07
0.6
PBV (x) Implied market
Upside/ Downside
price (Bt)
to current price (%)
+2.0SD
2.5
297
58
+1.5SD
2.3
276
47
+1.0SD
2.1
255
36
+0.5SD
1.9
234
25
Average
1.8
213
14
-0.5SD
1.6
193
3
-1.0SD
1.4
172
-8
-1.5SD
1.3
151
-20
-2.0SD
1.1
130
-31
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 2 of 4
Figure 3: KBANK's PER band and sensitivity of market prices based on PER at different standard deviation levels PER (x) Implied market
+2 S.D.
to current price (%)
+2.0SD
14.8
248
32
Avg.
+1.5SD
14.0
234
25
+1.0SD
13.1
219
17
+0.5SD
12.2
204
9
Average
11.3
190
1
-0.5SD
10.5
175
-7
-1.0SD
9.6
160
-15
-1.5SD
8.7
146
-22
-2.0SD
7.8
131
-30
Source: Bloomberg, KT ZMICO Research
Oct-15
Nov-14
May-15
May-14
Jun-13
Dec-13
Jul-12
Jan-13
Feb-12
Mar-11
Aug-11
Sep-10
Oct-09
Mar-10
Apr-09
Nov-08
-2 S.D.
Dec-07
Upside/ Downside
price (Bt) +1 S.D.
-1 S.D.
May-08
Jan-07
2015E
Jun-07
(X) 17 16 15 14 13 12 11 10 9 8 7 6 5
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 3 of 4
Note: KT ZMICO is a partnership between KTB and ZMICO. An executive of KT ZMICO Securities is also a board member of BCP, BTC, CI, KBS, PSL, SVH, VNG, ZMICO, CPI . KT ZMICO is a financial advisor for U, LOXLEY, SUTHA, ZMICO, MAKRO, CPALL, PLE, SAFARI, PACE, TPOLY, TFG. KT ZMICO is a co‐underwriter of KOOL, ORI, SCI, SR.
Anti‐corruption Progress Indicator
Level 1 (Committed) : Organization’s statement or board's resolution to work against corruption and to be in compliance with all relevant laws. Level 2 (Declared) : Public declaration statement to participate in Thailand's private sector Collective Action Coalition Against Corruption (CAC) or equivalent initiatives Level 3 (Established) : Public out preventive measures, risk assessment, communication and training for all employees, including consistent monitoring and review processes Level 4 (Certified) : Audit engagement by audit committee or auditors approved by the office of SEC, and receiving certification or assurance by independent external assurance providers (CAC etc.) Level 5 (Extended) : Extension of the anti‐corruption policy to business partners in the supply chain, and disclosure of any current investigations, prosecutions or closed cases Insufficient or not clearly defined policy Data not available / no policy
DISCLAIMER This document is produced using open sources believed to be reliable. However, their accuracy and completeness cannot be guaranteed. The statements and opinions herein were formed after due and careful consideration for use as information for the purposes of investment. The opinions contained herein are subject to change without notice. This document is not, and should not be construed as, an offer or the solicitation of an offer to buy or sell any securities. The use of any information contained in this document shall be at the sole discretion and risk of the user.
KT ZMICO RESEARCH – RECOMMENDATION DEFINITIONS STOCK RECOMMENDATIONS BUY: Expecting positive total returns of 15% or more over the next 12 months OUTPERFORM: Expecting total returns between ‐10% to +15%; returns expected to exceed market returns over a six‐month period due to specific catalysts UNDERPERFORM: Expecting total returns between ‐10% to +15%; returns expected to be below market returns over a six‐month period due to specific catalysts SELL: Expecting negative total returns of 10% or more over the next 12 months
SECTOR RECOMMENDATIONS OVERWEIGHT: The industry, as defined by the analyst's coverage universe, is expected to outperform the relevant primary market index by at least 10% over the next 12 months. NEUTRAL: The industry, as defined by the analyst's coverage universe, is expected to perform in line with the relevant primary market index over the next 12 months. UNDERWEIGHT: The industry, as defined by the analyst's coverage universe, is expected to underperform the relevant primary market index by 10% over the next 12 months.
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 4 of 4
Earnings Review
Close Bt187.50
Banking October 21, 2015
Beat forecast/Below forecast/In line
3Q15 net profit quite in line but core profit slightly above forecast Price Performance (%)
Source: SET Smart
FY15
FY16
Consensus EPS (Bt)
17.659
20.283
KT ZMICO vs. consensus Share data
-5.3%
-11.3%
Reuters / Bloomberg
KBANK.BK/KBANK TB 2,393.26
Paid‐up Shares (m)
10.00
Par (Bt)
449.00/12,673.00
Market cap (Bt bn / US$ m)
48.98/48.97
Foreign limit / actual (%)
252.00/163.50
52 week High / Low (Bt)
6,799.00
Avg. daily T/O (shares 000) NVDR (%)
24.13
Estimated free float (%)
78.45
Beta
1.10
URL
www.kasikornbank.com
CGR
Level 4 (Certified)
Anti‐corruption
Prapharas Nonthapiboon Analyst, no 17836 [email protected] 66 (0) 2695‐5872
Switch to Outperform on solid core earnings and sound balance sheet We switch our rating to Outperform from Underperform as we see some potential upside risk to our earnings forecasts, especially for 2015E on the bank’s solid non‐interest income. Moreover, its balance sheet remains quite solid vs. direct peers, which should enable the bank to be in a better position to deal with the macro headwinds. 3Q15 results quite in line with our forecast and the street KBANK posted 3Q15 net profit (NP) of Bt10.1bn (‐19% YoY, ‐12% QoQ) quite in line with our forecast of Bt9.6bn and the consensus estimate of Bt10.3bn. Meanwhile, its core profit was slightly ahead of our forecast by 8‐9% mainly on higher‐than‐expected gain on trading and FX transactions and NIM as well as lower‐than‐expected operating expenses. 3Q15 net profit stood at Bt10.1bn (‐19% YoY, ‐12% QoQ) The main reasons behind the NP drop were lower NIM and a higher provision both YoY and QoQ on higher NPLs. The bank set aside a much higher provision of 190 bps in 3Q15 (vs. 98 bps in 3Q14 and 154 bps in 2Q15), keeping the total provision for 9M15 at 149 bps in line with the bank’s latest guidance of ~150bps for FY15. Meanwhile, loans for 3Q15 grew modestly by 0.7% QoQ and 3.3% YTD vs. our forecast of +5% and the bank’s target of 3% for 2016E. However, the bank set a higher provision in 3Q15, resulting in a higher reserve to the BoT’s required reserve QoQ to 186% from 181%, which remained solid vs. several peers (e.g., BBL 217%, SCB 113%, TMB 180%, TCAP 153%, TISCO 122% and KKP 155%). Meanwhile, its reserve‐ to‐NPL ratio was down slightly QoQ to 132% from 138% but still higher than the sector average (excluding BBL) at ~110%. Possible upside risk to 2015E earnings The 9M15 net profit represented 85% of our FY15E forecast, therefore we see slight upside risk to our 2015E earnings forecast on its solid non‐ interest income and slightly higher NIM. We will revisit our earnings forecasts after the analyst meeting set for 2 Nov‐15, at which the bank will also give the 2016E business guidance. Financials and Valuation FY Ended 31 Dec PPOP (Btm) Provision (Btm) Net profit (Btm) EPS (Bt) EPS growth (%) Book value (Bt) Dividend (Bt) FY Ended 31 Dec PER (X) PBV (X) Dividend yield (%) ROE (%)
2013 56,067 11,743 41,325 17.27 17% 91.60 3.50 2013 10.86 2.05 1.87 20%
2014 63,365 14,243 46,153 19.28 12% 107.41 4.00 2014 9.72 1.75 2.13 19%
2015E 67,827 24,052 40,019 16.72 ‐13% 120.13 4.00 2015E 11.21 1.56 2.13 15%
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 1 of 4
2016E 74,307 26,939 43,043 17.99 8% 134.12 4.50 2016E 10.43 1.40 2.40 14%
2017E 81,081 27,023 49,422 20.65 15% 150.27 5.00 2017E 9.08 1.25 2.67 15%
Figure 1: 3Q15 earnings results Statement of comprehensive income (Btmn) Fiscal Year-Ended Dec.
3Q14
2Q15
3Q15 % YoY % QoQ
9M14
9M15 % YoY
2015E % YoY % 9M to 15E
Net Interest Income
21,294
21,119
21,094
-1%
0%
61,368
63,188
3%
82,032
-1%
Non Interest Income
14,331
16,637
16,051
12%
-4%
41,579
47,972
15%
64,254
16%
75%
Operating Income
35,624
37,756
37,145
4%
-2% 102,947
111,160
8% 146,286
6%
76%
Operating Expenses
14,954
15,947
15,460
3%
-3%
43,339
46,824
8%
66,266
8%
71%
Operating Profit
20,336
21,642
21,442
5%
-1%
58,756
63,675
8%
80,020
4%
80%
Provision Expenses (Reversal)
3,661
6,037
7,507
105%
24%
10,357
17,550
69%
24,052
69%
73%
Tax Expenses
3,368
2,924
2,743
-19%
-6%
9,870
8,987
-9%
11,194
-12%
80%
Net Profit
12,516
11,479
10,117
-19%
-12%
36,187
33,997
-6%
40,019
-13%
85%
PPOP-after tax
16,968
18,718
18,699
10%
0%
48,886
54,641
12%
67,827
7%
81%
EPS (Bt)
5.23
4.80
4.23
-19%
-12%
15.12
14.25
-6%
16.72
-13%
85%
Key Statistics & Ratios
3Q14
2Q15
3Q15
9M14
9M15
Gross NPLs (Btmn)
35,013
Gross NPLs/Loans
40,841
2.16%
Loan Loss Reserve/NPLs
46,035
35,013
77%
2015E
46,035
49,969
2.39%
2.62%
2.16%
2.62%
2.85%
142.4% 138.1%
131.6%
142.4%
131.6%
127.4% 14.6%
Tier I/Risk Assets
14.0%
13.8%
14.6%
14.0%
14.6%
C apital Adequacy Ratio
17.0%
17.4%
17.7%
17.0%
17.7%
17.2%
Loan to Deposit Ratio
92.6%
93.9%
94.1%
92.6%
94.1%
92.1%
Loan to Deposit & borrowing
88.6%
89.4%
89.8%
88.6%
89.8%
87.7%
Provision to loans
0.98%
1.54%
1.90%
0.94%
1.49%
1.50%
C ost to Income
42.0%
42.2%
41.6%
42.1%
42.1%
45.3%
Non Interest Income/Total Income
40.2%
44.1%
43.2%
40.4%
43.2%
43.9%
Net Interest Margin
3.79%
3.60%
3.57%
3.72%
3.62%
3.55%
Tax rate
19.8%
18.5%
19.3%
20.7%
19.26%
20.0%
Loan Growth YoY
6.2%
6.4%
5.1%
6.2%
5.1%
5.0%
Loan Growth QoQ
2.0%
1.2%
0.7%
2.0%
0.7%
Source: KTZMICO Research
Figure 2: KBANK's P/BV band and sensitivity of market prices based on P/BV at different standard deviation levels (X)
2015E
3.1 2.6
+2 S.D. +1 S.D.
2.1
+0.5 S.D. Avg. -0.5 S.D. -1 S.D.
1.6
-2 S.D.
1.1
Oct-15
Nov-14
May-15
May-14
Jun-13
Dec-13
Jul-12
Jan-13
Feb-12
Mar-11
Source: Bloomberg, KT ZMICO Research
Aug-11
Sep-10
Oct-09
Mar-10
Apr-09
Nov-08
Dec-07
May-08
Jan-07
Jun-07
0.6
PBV (x) Implied market
Upside/ Downside
price (Bt)
to current price (%)
+2.0SD
2.5
297
58
+1.5SD
2.3
276
47
+1.0SD
2.1
255
36
+0.5SD
1.9
234
25
Average
1.8
213
14
-0.5SD
1.6
193
3
-1.0SD
1.4
172
-8
-1.5SD
1.3
151
-20
-2.0SD
1.1
130
-31
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 2 of 4
Figure 3: KBANK's PER band and sensitivity of market prices based on PER at different standard deviation levels PER (x) Implied market
+2 S.D.
to current price (%)
+2.0SD
14.8
248
32
Avg.
+1.5SD
14.0
234
25
+1.0SD
13.1
219
17
+0.5SD
12.2
204
9
Average
11.3
190
1
-0.5SD
10.5
175
-7
-1.0SD
9.6
160
-15
-1.5SD
8.7
146
-22
-2.0SD
7.8
131
-30
Source: Bloomberg, KT ZMICO Research
Oct-15
Nov-14
May-15
May-14
Jun-13
Dec-13
Jul-12
Jan-13
Feb-12
Mar-11
Aug-11
Sep-10
Oct-09
Mar-10
Apr-09
Nov-08
-2 S.D.
Dec-07
Upside/ Downside
price (Bt) +1 S.D.
-1 S.D.
May-08
Jan-07
2015E
Jun-07
(X) 17 16 15 14 13 12 11 10 9 8 7 6 5
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 3 of 4
Note: KT ZMICO is a partnership between KTB and ZMICO. An executive of KT ZMICO Securities is also a board member of BCP, BTC, CI, KBS, PSL, SVH, VNG, ZMICO, CPI . KT ZMICO is a financial advisor for U, LOXLEY, SUTHA, ZMICO, MAKRO, CPALL, PLE, SAFARI, PACE, TPOLY, TFG. KT ZMICO is a co‐underwriter of KOOL, ORI, SCI, SR.
Anti‐corruption Progress Indicator
Level 1 (Committed) : Organization’s statement or board's resolution to work against corruption and to be in compliance with all relevant laws. Level 2 (Declared) : Public declaration statement to participate in Thailand's private sector Collective Action Coalition Against Corruption (CAC) or equivalent initiatives Level 3 (Established) : Public out preventive measures, risk assessment, communication and training for all employees, including consistent monitoring and review processes Level 4 (Certified) : Audit engagement by audit committee or auditors approved by the office of SEC, and receiving certification or assurance by independent external assurance providers (CAC etc.) Level 5 (Extended) : Extension of the anti‐corruption policy to business partners in the supply chain, and disclosure of any current investigations, prosecutions or closed cases Insufficient or not clearly defined policy Data not available / no policy
DISCLAIMER This document is produced using open sources believed to be reliable. However, their accuracy and completeness cannot be guaranteed. The statements and opinions herein were formed after due and careful consideration for use as information for the purposes of investment. The opinions contained herein are subject to change without notice. This document is not, and should not be construed as, an offer or the solicitation of an offer to buy or sell any securities. The use of any information contained in this document shall be at the sole discretion and risk of the user.
KT ZMICO RESEARCH – RECOMMENDATION DEFINITIONS STOCK RECOMMENDATIONS BUY: Expecting positive total returns of 15% or more over the next 12 months OUTPERFORM: Expecting total returns between ‐10% to +15%; returns expected to exceed market returns over a six‐month period due to specific catalysts UNDERPERFORM: Expecting total returns between ‐10% to +15%; returns expected to be below market returns over a six‐month period due to specific catalysts SELL: Expecting negative total returns of 10% or more over the next 12 months
SECTOR RECOMMENDATIONS OVERWEIGHT: The industry, as defined by the analyst's coverage universe, is expected to outperform the relevant primary market index by at least 10% over the next 12 months. NEUTRAL: The industry, as defined by the analyst's coverage universe, is expected to perform in line with the relevant primary market index over the next 12 months. UNDERWEIGHT: The industry, as defined by the analyst's coverage universe, is expected to underperform the relevant primary market index by 10% over the next 12 months.
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 4 of 4
