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.
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 48.6% from 44.2% in 3Q13, in line
with expectations. Full-year cost to income ratio improved to 44.15% from
45.26% 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 2.33% from 2.38% at 3Q13. Loan loss reserve
(LLR) coverage inched up to 135% 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.