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Kasikorn Bank

4Q13A: Loan growth missed target BUY

Kasikorn Bank Plc (KBANK)

Profit rose 24% YoY but slipped 11% QoQ to Bt9.5bn, in line with our forecast.

4Q13A results reflected: 1) a miss in target loan growth, 2) a positive surprise on

NIM expansion, 3) continued strong non-NII, 4) seasonal hike in cost to income

ratio, and 5) stable asset quality.

Key points:

1. Loan growth: Below expectations at just +1.8% QoQ (vs. 1.65% QoQ for 3Q13),

reflecting lower-than-expected seasonal acceleration of SME loans and high

repayment of corporate loans. Its full-year loan growth ended at 8%, below

both the bank's target of 9-11% and our forecast of 10%.

2. Net interest margin: Moving opposite to our expectation, +8 bps QoQ to 3.6%.

Yield on earning assets rose 9 bps QoQ. Cost of funds edged up 2 bps QoQ.

3. Non-interest income: In line with expectation, +14% YoY, but -5% QoQ. Fullyear

non-NII rose 18%, in line with expectation. Net fee income was up 10% YoY

but flat QoQ, with full-year growth of 20%. Net insurance income was up 34%

YoY but seasonally down 20% QoQ, with full-year growth of 33%.

4. Cost to income ratio: Seasonally up QoQ to 48.6percent from 44.2% in 3Q13, in line

with expectations. Full-year cost to income ratio improved to 44.15percent from

45.26percent for 2012.

5. Asset quality: In line with guidance, provision expense rose 3% QoQ, with fullyear

credit cost of 82 bps, in line with guidance. NPL by amount was stable

QoQ, bringing NPL ratio down to 2.33percent from 2.38% at 3Q13. Loan loss reserve

(LLR) coverage inched up to 135percent from 133% at 3Q13.

Maintain Buy. We keep KBANK as a Buy with a slight increase in target price to

Bt214 (2x 2014F BVPS) after rolling valuation base to YE2014. KBANK remains our

top pick: it has the highest non-interest income as a cushion against downside risk

to loan growth plus the most small SME loans, which seems to be the segment

with the strongest growth potential.

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