Kasikorn Bank

Q4 2012F: Provisions may surprise on the downside BUY

Kasikorn Bank Plc (KBANK)

Q4 2012F preview - Negative surprise on provisions. 4Q12 guidance suggests we may

be in for an unpleasant surprise on provisions. Based on management guidance, we

forecast 4Q12F earnings to jump 123% YoY but slide 27% QoQ to Bt6.7bn,

1) Provisions: Up QoQ to bring average quarterly provisions to Bt2-2.1bn (credit cost

of ~65 bps), above the original target of Bt1.7-1.9bn. We now expect a 31% QoQ

jump in provisions to Bt2.64bn in 4Q12.

2) NPLs: Up slightly QoQ both in terms of percentage to total loans and absolute

amount, mainly due to loan reclassification as suggested by the BoT.

3) Loan growth: ~10percent for 2012, in line with the bank's target of 9-11% but slightly

lower than our original forecast of 11%.

4) Non-interest income growth: ~18percent for 2012 (translating to a 6% QoQ fall for 4Q12),

meeting the bank's target of at least 18%. Fee income growth is estimated to be

in the mid-teens for 2012, indicating this was flat QoQ.

5) Cost to income ratio: Up substantially QoQ on seasonality, bringing cost to income

ratio up to 46percent for 2012 from 43percent for 9M12.

Sustainable momentum in 2013. KBANK leaves 2013 targets unchanged: sustainable

loan growth at 9-11%, non-NII growth in the mid-teens, stable or slight improvement

in NIM from yield enhancement (suggesting upside risk to our forecast of a 5 bps slip),

stable provisions and easing cost to income ratio on the completion of IT upgrade.

KBANK expects SME and retail loans to be key loan growth drivers in 2013, reflecting

high demand from domestic consumption and international trade benefits from the

FTA and AEC and its strategy to be more risk-adjusted return selective.