Kasikornbank

Kasiskornbank Q4 2012 profit boosted by lower OPEX

Kasikorn Bank Plc (KBANK)

16% above our number

KBANK posted 4Q12 earnings of Bt7.7bn, up 154% YoY but down 16% QoQ). The result was 16% above our estimate (but was in line with the Bloomberg consensus) because of lower OPEX than modeled. The bank's 4Q12 OPEX was 8% below our number, due to lower costs booked for the core banking system. As such, 4Q12 pre-provision operating profit was Bt13.3bn, up 32% YoY (but down 10% QoQ). KBANK's FY12 earnings jumped 46% YoY to Bt35.3bn, which represents 103% of our FY12 earnings projection.

Results highlights

The loan portfolio expanded by 3.1% QoQ and 9.6% YoY, led by the corporate and retail categories. Due to better QoQ lending growth and well-managed funding costs, 4Q12 NIM was 3.42%, close to the number posted for 3Q12. KBANK's loan loss provisions totaled Bt2.6bn for the quarter, up by 31% QoQ and 23% YoY. Its NPLs/loans ratio was 2.16% at YE12, up slightly from 2.07% at end-September, while its loan loss coverage dipped to 132percent from 143% three months earlier.

Fee income grew by 1% QoQ and 34% YoY to Bt9.7bn, driven by banking fees and bancassurance sales commissions. 4Q12 OPEX was Bt13.7bn, up by 10% YoY and 19% QoQ (and 8% lower than our estimate). Given strong YoY loan and fee income growth and a sustained NIM, KBANK's cost/income ratio declined to 50.7% in 4Q12 from 56.1% in same period last year. Its FY12 cost/income ratio stood at 45.2%—below its guidance for the year of 46.5%.

Outlook

We expect the bank to deliver better QoQ earnings for 1Q13, due to seasonality and good OPEX management. Note that management guides that the FY13 cost/income will decline 1percent from last year.

What's changed?

We maintain our FY13 and FY14 profit forecasts unchanged for the moment at Bt43.9bn and Bt50.0bn, respectively.

Recommendation

Our BUY rating stands, premised on scope for earnings upside from: 1) better operating efficiency (its cost/income ratio is likely to decline from the 45.2% posted for FY12, the bank guides), 2) fee income growth and 3) stronger lending expansion (led by the SME and retail categories).