Bond: KBANK 5.458 28
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Fundamental View
AS OF 01 Apr 2025Kasikornbank (KBANK) is a historically sound and profitable bank.
Capitalisation is strong and the bank has among the highest CASA ratios in the banking sector. Asset quality took a surprise turn for the worse in 4Q22 due to its larger SME exposure and the bank has since focused on de-risking its portfolio. Credit costs are improving but remain elevated.
Margins are high compared to most other Thai banks we cover as a result of its strong SME franchise, but the shift in growth focus to the safer but lower yielding segments has diminished its margin lead.
Business Description
AS OF 01 Apr 2025- KBank is currently the second largest bank in Thailand. It briefly was the largest from 2018 until mid-2020, upon which Bangkok Bank completed its acquisition of Indonesia's Bank Permata and took its place.
- KBank's history can be traced back to 1945 when it was first established as Thai Farmers Bank. It was listed on the Stock Exchange of Thailand in 1976 and changed its name to Kasikornbank in 2003.
- As of end-December 2024, the bank's loan mix by segment consists of 40% corporate, 26% SME, 28% retail and 6% others.
- KBank is known for its strong SME franchise. Its focus industries in SME are construction, construction materials, food & beverage, and hardware.
- It partially owns a life insurance company, Muang Thai Life.
Risk & Catalysts
AS OF 01 Apr 2025Loan growth has been middling across the Thai banks due to a focus on quality amid the current backdrop. A pickup in economic momentum is hoped for in 2025, but we remain cautious of another year of disappointing growth and uneven recovery, particularly with risks from potential US tariffs.
We expect NIMs at the Thai banks to see a further decline this year on the back of policy rate cuts. KBANK’s switch to focus on safer segments is also weighing on the NIM, though it currently remains higher compared to most of its peers.
Credit costs remain elevated compared to peers due to the soft macroeconomic backdrop and challenged SMEs, given KBANK’s larger SME and restructured book. KBANK’s higher NIM and low-40%s cost-income ratio however provide comfortable room to absorb its higher credit costs and maintain a similar level of returns as peers, and the focus on safer segments seems is also helping to stabilize credit costs. Its prolonged balance sheet cleanup has concluded at YE24 and management guided for credit costs to return to a normalized 140-160 bp range this year.
Key Metric
AS OF 01 Apr 2025THB mn | FY20 | FY21 | FY22 | FY23 | FY24 |
---|---|---|---|---|---|
PPP ROA | 2.44% | 2.38% | 2.36% | 2.52% | 2.57% |
ROA | 0.85% | 0.98% | 0.86% | 0.99% | 1.13% |
ROAE | 7.0% | 8.3% | 7.3% | 8.2% | 8.9% |
Equity / Assets | 13.4% | 13.1% | 13.4% | 13.9% | 14.6% |
CET1 Ratio | 15.5% | 15.5% | 15.9% | 16.5% | 17.3% |
Gross NPL ratio | 3.93% | 3.76% | 3.19% | 3.19% | 3.18% |
Provisions / Loans | 2.05% | 1.73% | 2.11% | 2.08% | 1.89% |
Gross LDR | 96% | 93% | 91% | 92% | 92% |
Liquidity Coverage Ratio | 161% | 174% | 164% | 195% | n/m |
CreditSight View Comment
AS OF 22 Apr 2025Kasikornbank is the 2nd largest bank in Thailand. We are cautious about its one third loan book exposure to SMEs given the macro backdrop; credit costs spiked in 4Q22 mainly from the SME book and high yield small ticket lending, and the restructured loan book remains sizable compared to peers. The bank however has switched to focus on safer segments, which is weighing on the NIM but helped to stabilize credit costs. Credit costs remain fairly elevated but comfortably absorbed thus far. Capital is high with CET1 above 17%. The NIM though is on a decline from rates coming down. We also see a significant impact to the Thai economy and banks from potential US tariffs, and think it should trade slightly behind the top Indian and Philippine banks. We therefore move KBANK to U/P.
Recommendation Reviewed: April 22, 2025
Recommendation Changed: April 22, 2025
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