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Kasikornbank

Moving with caution Buy

Kasikornbank Plc (KBANK)

2014F GDP scenarios. At the analyst meeting on Friday, KBANK's president presented

three scenarios for its 2014 GDP growth forecast. Its base-case 2014F GDP growth is

3.7% on the assumption that there will be a government in place within 1H14. In its

more bearish scenario, KBANK forecasts 2014F GDP growth at 2.5% based on the

assumption that political unrest hangs on into 2H14. In its worst-case scenario, it

forecasts 2014F GDP growth of 2.2%, assuming the combination of political unrest

continuing into 2H14 and poor exports from a less robust recovery in the global

economy.

Maintain 2014 target, but leans toward the low end. KBANK is standing by its

2014 targets even for the worst-case GDP growth, but sees greater probability of

meeting the low end of its targets. 2014 targets: 1) stable 9-11% loan growth; 2) lower

non-interest income growth to "up to mid-teens" from 2013's "mid-teens"; 3) stable

net interest margin at 3.4-3.6%; 4) stable cost to income ratio at mid-40%;

5) continued high provisions at 0.85% of total loans; 6) NPL ratio below 2.2%. We see

downside risk to its loan growth target and maintain our more conservative 2014F

loan growth of 8%.

4Q13F preview. We forecast a 17% YoY growth in 4Q13F but a fall of 16% QoQ to

Bt9bn. We expect 4Q13F results to reflect: 1) a strong seasonal acceleration in loan

growth to beat our full-year forecast of 10% (9.2% 11M13 YTD); 2) a substantial

contraction in NIM as a result of interest rate cuts; 3) QoQ fall in non-interest income

on insurance income; 4) sharp seasonal QoQ rise in opex; 5) QoQ rise in provision

expense to meet the full-year credit cost target of mid-80s.

Maintain Buy. We keep KBANK as a Buy, with its outperforming and strongest fee

and insurance income able to cushion against downside risk on loan growth plus an

easing in cost to income ratio after the IT upgrade finally gets off the books this year.


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