Modest 1Q15E earnings; potential downside risk on 2015E earnings
KASIKORNBANK Buy (15E TP Bt270.00)
Company Update
Close Bt226.00
Banking March 30, 2015
Earnings upgrade/Earnings downgrade/Overview unchanged
Modest 1Q15E earnings; potential downside risk on 2015E earnings
FY15
FY16
Consensus EPS (Bt)
21.199
24.103
KT ZMICO vs. consensus Share data
‐2.0%
‐2.3%
Reuters / Bloomberg
KBANK.BK/KBANK TB
Paid‐up Shares (m)
2,393.26
Par (Bt)
10.00
Market cap (Bt bn / US$ m)
541.00/16,617.00
Foreign limit / actual (%)
48.98/48.97
52 week High / Low (Bt)
252.00/171.50
Avg. daily T/O (shares 000)
5,617.00
NVDR (%)
27.84
Estimated free float (%)
79.71
Beta
1.17
URL
www.kasikornbank.com
CGR
Maintain KBANK as our top Buy We maintain a BUY rating and keep KBANK as our top Buy stock in the sector. Note that we now see some downside risk on our earnings forecasts for the sector as well as KBANK on the potential for slower‐ than‐expected economic growth. However, we still expect KBANK to be in a better positon to withstand the headwinds and to manage its growth when compared to peers. Expect 1Q15E net profit of Bt12.5bn (+5% YoY, +25% QoQ) The main earnings growth drivers YoY for 1Q15E should be 1) sound loan growth of ~7% YoY; 2) higher NIM; and 3) modest non‐interest income growth of 6% YoY. However, the higher NP QoQ should be due to lower operating expenses QoQ due to the normal pattern for KBANK, as the bank normally books high operating expenses in 4Q. Maintain 2015 targets despite lowering 2015 GDP growth forecast Kasikorn Research (KResearch) recently cut its 2015 GPD growth forecast to 2.8% from 4%. The main reason behind the revision is that the bank sees several economic indicators signaling a slower recovery, especially for export growth and private consumption growth. Despite the latest GDP cut, the bank maintains all of its financial targets and will revisit the situation again after the 1H15 results. See downside risk on 2015E earnings on slower economic growth Although KBANK is keeping all of its 2015E financial targets unchanged, we now see higher downside risks to our current earnings forecasts for the banking sector, including KBANK. As mentioned in the earlier sector report, we see potential downside risk to the sector’s earnings for 2015E of around 5%. Financial and Valuation FY Ended 31 Dec
2013
2014
2015E
2016E
2017E
PPOP (Btm)
56,067
63,365
69,654
77,545
87,419
Net profit (Btm)
41,325
46,153
49,707
56,359
63,255
17.27
19.28
20.77
23.55
26.43
EPS growth (%)
17%
12%
8%
13%
12%
Book value (Bt)
91.60
107.41
124.40
143.79
165.51
EPS (Bt)
Dividend (Bt)
3.50
3.90
4.15
4.71
5.29
FY Ended 31 Dec
2013
2014
2015E
2016E
2017E
Prapharas Nonthapiboon
PER (X)
13.09
11.72
10.88
9.60
8.55
Analyst, no 17836
PBV (X)
2.47
2.10
1.82
1.57
1.37
Dividend yield (%)
1.55
1.72
1.84
2.08
2.34
ROE (%)
20%
19%
18%
18%
17%
[email protected] 66 (0) 2695‐5872
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 1 of 5
Expect 1Q15E net profit of Bt12.5bn (+5% YoY, +25% QoQ) We expect KBANK’s 1Q15E net profit (NP) at Bt12.5bn (+5% YoY and +25% QoQ). The main NP growth drivers YoY for 1Q15E should be 1) sound loan growth of ~7% YoY; 2) higher NIM; and 3) modest non‐interest income growth of 6% YoY (~+9% YoY if excluding extra items in gain on foreign exchange transactions in 1Q14). In terms of credit cost, the bank hints that it will set a higher provision in 1Q15E at around 100 bps while maintaining its full‐year 2015E provision guidance of around 95 bps (+/‐). The high provision in 1Q is likely to match with the seasonally low operating expenses in 1Q. However, the higher net profit QoQ should result from lower operating expenses QoQ due to the normal pattern for KBANK, as the bank normally books high operating expenses in 4Q and lower expenses in others quarters, especially in 1Q. Loans are likely to grow by 1‐2% QoQ while NIM in 1Q15E is likely to contract QoQ due partly to the rate cut impact in around mid‐Mar‐15. Figure 1: 1Q15E earnings forecast Statement of comprehensive income (Btmn) Fiscal Year-Ended Dec.
% YoY
% QoQ
Net Interest Income
19,494
21,765
21,295
9%
-2%
Non Interest Income
13,668
13,944
14,488
6%
4%
Operating Income
33,163
35,709
35,782
8%
0%
Operating Expenses
13,247
18,080
14,940
13%
-17%
Operating Profit
19,587
17,301
20,592
5%
19%
Provision Expenses (Reversal)
3,660
3,886
3,919
7%
1%
Tax Expenses
3,237
2,822
3,368
4%
19%
Net Profit
11,939
9,967
12,505
5%
25%
PPOP-after tax
16,350
14,479
17,224
5%
19%
EPS (Bt)
4.99
4.16
5.23
5%
25%
Key Statistics & Ratios
1Q14
4Q14
1Q15E
Gross NPLs (Btmn)
1Q14
33,853
Gross NPLs/Loans Loan Loss Reserve/NPLs
4Q14
36,067
1Q15E
37,853
2.14%
2.24%
2.25%
137.8%
141.4%
140.0%
Tier I/Risk Assets
12.4%
13.5%
12.4%
C apital Adequacy Ratio
15.6%
17.3%
15.6%
Loan to Deposit Ratio
93.3%
93.7%
94.8%
Loan to Deposit & borrowing
89.7%
88.9%
90.0%
Provision to loans
1.01%
1.02%
1.01%
C ost to Income
39.9%
50.6%
41.8%
Non Interest Income/Total Income
41.2%
39.0%
40.5%
Net Interest Margin
3.62%
3.86%
3.72%
Tax rate
19.9%
20.5%
19.9%
Loan Growth YoY
7.0%
6.1%
7.0%
Loan Growth QoQ
0.8%
1.7%
1.6%
Source: KTZMICO Research
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 2 of 5
Maintain 2015 financial targets despite lowering 2015 GDP growth forecast Kasikorn Research (KResearch) recently cut its 2015 GPD growth forecast to 2.8% from 4% set in Nov‐14. The main reason behind the revision is that the bank sees several economic indicators signaling a slower recovery, especially for export growth and private consumption growth, with KResearch having cut its forecast for the former to 0% from 3.5% previously and to +2% from +3.3% previously for the latter. Despite the latest GDP cut, the bank maintains all of its financial targets and will revisit the situation again after the 1H15 results. Figure 2: KBANK’s financial targets for 2015E vs. our forecasts 2014E
2014
KBANK's Targets*
2015E
2015E
Actual KBANK's Targets* KTZ Forecasts
ROE
N/A
19.4%
N/A
ROA
N/A
2.0%
N/A
2.0%
3.4-3.6%
3.8%
3.5-3.7%
3.77%
Net interest margin (NIM) Loan growth YoY
17.9%
Company Update
Close Bt226.00
Banking March 30, 2015
Earnings upgrade/Earnings downgrade/Overview unchanged
Modest 1Q15E earnings; potential downside risk on 2015E earnings
FY15
FY16
Consensus EPS (Bt)
21.199
24.103
KT ZMICO vs. consensus Share data
‐2.0%
‐2.3%
Reuters / Bloomberg
KBANK.BK/KBANK TB
Paid‐up Shares (m)
2,393.26
Par (Bt)
10.00
Market cap (Bt bn / US$ m)
541.00/16,617.00
Foreign limit / actual (%)
48.98/48.97
52 week High / Low (Bt)
252.00/171.50
Avg. daily T/O (shares 000)
5,617.00
NVDR (%)
27.84
Estimated free float (%)
79.71
Beta
1.17
URL
www.kasikornbank.com
CGR
Maintain KBANK as our top Buy We maintain a BUY rating and keep KBANK as our top Buy stock in the sector. Note that we now see some downside risk on our earnings forecasts for the sector as well as KBANK on the potential for slower‐ than‐expected economic growth. However, we still expect KBANK to be in a better positon to withstand the headwinds and to manage its growth when compared to peers. Expect 1Q15E net profit of Bt12.5bn (+5% YoY, +25% QoQ) The main earnings growth drivers YoY for 1Q15E should be 1) sound loan growth of ~7% YoY; 2) higher NIM; and 3) modest non‐interest income growth of 6% YoY. However, the higher NP QoQ should be due to lower operating expenses QoQ due to the normal pattern for KBANK, as the bank normally books high operating expenses in 4Q. Maintain 2015 targets despite lowering 2015 GDP growth forecast Kasikorn Research (KResearch) recently cut its 2015 GPD growth forecast to 2.8% from 4%. The main reason behind the revision is that the bank sees several economic indicators signaling a slower recovery, especially for export growth and private consumption growth. Despite the latest GDP cut, the bank maintains all of its financial targets and will revisit the situation again after the 1H15 results. See downside risk on 2015E earnings on slower economic growth Although KBANK is keeping all of its 2015E financial targets unchanged, we now see higher downside risks to our current earnings forecasts for the banking sector, including KBANK. As mentioned in the earlier sector report, we see potential downside risk to the sector’s earnings for 2015E of around 5%. Financial and Valuation FY Ended 31 Dec
2013
2014
2015E
2016E
2017E
PPOP (Btm)
56,067
63,365
69,654
77,545
87,419
Net profit (Btm)
41,325
46,153
49,707
56,359
63,255
17.27
19.28
20.77
23.55
26.43
EPS growth (%)
17%
12%
8%
13%
12%
Book value (Bt)
91.60
107.41
124.40
143.79
165.51
EPS (Bt)
Dividend (Bt)
3.50
3.90
4.15
4.71
5.29
FY Ended 31 Dec
2013
2014
2015E
2016E
2017E
Prapharas Nonthapiboon
PER (X)
13.09
11.72
10.88
9.60
8.55
Analyst, no 17836
PBV (X)
2.47
2.10
1.82
1.57
1.37
Dividend yield (%)
1.55
1.72
1.84
2.08
2.34
ROE (%)
20%
19%
18%
18%
17%
[email protected] 66 (0) 2695‐5872
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 1 of 5
Expect 1Q15E net profit of Bt12.5bn (+5% YoY, +25% QoQ) We expect KBANK’s 1Q15E net profit (NP) at Bt12.5bn (+5% YoY and +25% QoQ). The main NP growth drivers YoY for 1Q15E should be 1) sound loan growth of ~7% YoY; 2) higher NIM; and 3) modest non‐interest income growth of 6% YoY (~+9% YoY if excluding extra items in gain on foreign exchange transactions in 1Q14). In terms of credit cost, the bank hints that it will set a higher provision in 1Q15E at around 100 bps while maintaining its full‐year 2015E provision guidance of around 95 bps (+/‐). The high provision in 1Q is likely to match with the seasonally low operating expenses in 1Q. However, the higher net profit QoQ should result from lower operating expenses QoQ due to the normal pattern for KBANK, as the bank normally books high operating expenses in 4Q and lower expenses in others quarters, especially in 1Q. Loans are likely to grow by 1‐2% QoQ while NIM in 1Q15E is likely to contract QoQ due partly to the rate cut impact in around mid‐Mar‐15. Figure 1: 1Q15E earnings forecast Statement of comprehensive income (Btmn) Fiscal Year-Ended Dec.
% YoY
% QoQ
Net Interest Income
19,494
21,765
21,295
9%
-2%
Non Interest Income
13,668
13,944
14,488
6%
4%
Operating Income
33,163
35,709
35,782
8%
0%
Operating Expenses
13,247
18,080
14,940
13%
-17%
Operating Profit
19,587
17,301
20,592
5%
19%
Provision Expenses (Reversal)
3,660
3,886
3,919
7%
1%
Tax Expenses
3,237
2,822
3,368
4%
19%
Net Profit
11,939
9,967
12,505
5%
25%
PPOP-after tax
16,350
14,479
17,224
5%
19%
EPS (Bt)
4.99
4.16
5.23
5%
25%
Key Statistics & Ratios
1Q14
4Q14
1Q15E
Gross NPLs (Btmn)
1Q14
33,853
Gross NPLs/Loans Loan Loss Reserve/NPLs
4Q14
36,067
1Q15E
37,853
2.14%
2.24%
2.25%
137.8%
141.4%
140.0%
Tier I/Risk Assets
12.4%
13.5%
12.4%
C apital Adequacy Ratio
15.6%
17.3%
15.6%
Loan to Deposit Ratio
93.3%
93.7%
94.8%
Loan to Deposit & borrowing
89.7%
88.9%
90.0%
Provision to loans
1.01%
1.02%
1.01%
C ost to Income
39.9%
50.6%
41.8%
Non Interest Income/Total Income
41.2%
39.0%
40.5%
Net Interest Margin
3.62%
3.86%
3.72%
Tax rate
19.9%
20.5%
19.9%
Loan Growth YoY
7.0%
6.1%
7.0%
Loan Growth QoQ
0.8%
1.7%
1.6%
Source: KTZMICO Research
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 2 of 5
Maintain 2015 financial targets despite lowering 2015 GDP growth forecast Kasikorn Research (KResearch) recently cut its 2015 GPD growth forecast to 2.8% from 4% set in Nov‐14. The main reason behind the revision is that the bank sees several economic indicators signaling a slower recovery, especially for export growth and private consumption growth, with KResearch having cut its forecast for the former to 0% from 3.5% previously and to +2% from +3.3% previously for the latter. Despite the latest GDP cut, the bank maintains all of its financial targets and will revisit the situation again after the 1H15 results. Figure 2: KBANK’s financial targets for 2015E vs. our forecasts 2014E
2014
KBANK's Targets*
2015E
2015E
Actual KBANK's Targets* KTZ Forecasts
ROE
N/A
19.4%
N/A
ROA
N/A
2.0%
N/A
2.0%
3.4-3.6%
3.8%
3.5-3.7%
3.77%
Net interest margin (NIM) Loan growth YoY
17.9%
