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
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.