The Nation



Kiatnakin Bank

Hold for dividend HOLD

Kiatnakin Bank Plc (KKP)

Noting to expect from 1Q14 earnings

We estimate KKP's 1Q14 net profit at B923m, shrinking

10.3%qoq and 20.6%yoy and making a record low in seven

quarters. Net interest income is projected to stay flat qoq

because the net loan growth has been substantially lower than

our and the company's FY2014 target of 8%yoy and 10%yoy,

respectively. Yet, KKP maintained its net loan growth target as it

projected to see disbursement of one corporate borrower of

B6bn, which is 3% of its current net loan, to help reduce a risk

of the downtrend. 1Q14 NIM is estimated at only 3.65%,

decreasing 7bp from the prior quarter because loans have not

grown whereas funding cost has increased from long-term bond

issuance to meet with duration of the loan. NPL has also

increased mainly from used-car leasing business. Fee income is

projected to decline 10.4%qoq in 1Q14 because there was not a

big transaction deal like in 4Q13, while bancassurance

transactions have also decreased following slowing car leasing

business. Likewise, income from other operations is anticipated

to lower 13.6%qoq. Loss from repossessed car selling has been

booked continuously, while profit from non-performing asset

(NPA) selling would be insignificant in this quarter on seasonal

effect. Debt provision is projected to increase 21.1%qoq. Credit

cost would increase to 140bp from 116bp in 4Q13, in line with

rising NPL.

- Hope to see business recovery in 2H14

We maintain our earnings profit for 2014-2015, projecting the

net profit in 2014 to drop 1.5%yoy, based on conservative

assumptions. Still, we project to see a business recovery in

2H14 if the political problem improves. Particularly, the car

leasing business that has been at the bottom of this round of

crisis would gradually revive in the second half of the year (loan

will grow; debt provision and loss from repossessed car will


- Hold for dividend

We recommend only holding KKP for its dividend of above 6-

8%p.a. on average (paying semiannually) in the next three

years. 2014 fair value (GGM), at 1.02x PBV and long-term ROE

forecast of 13%, is B42, no upside left.

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