DOWNLOAD
Kasikornbank
- Sector: Financial Services
- Sub Sector: Banks
- Region: Thailand
- Bond: KBANK 5.458 28
- Indicative Yield-to-Maturity (YTM): 4.77%
Read this content. Log in or sign up.
If you are an investor with us, log in first to your Metrobank Wealth Manager account.
If you are not yet a client, we can help you by clicking the SIGN UP button.
Fundamental View
AS OF 27 Dec 2024Kasikornbank (KBANK) is a historically sound and profitable bank.
Capitalisation is strong and the bank has among the highest CASA ratios in the banking sector. However, asset quality took a surprise turn for the worse in 4Q22 due to its larger SME exposure, and credit costs remain elevated.
Margins are high among the Thai banks we cover as a result of its strong SME franchise, but the NIM has been falling steadily over the past 5 years as a result of strong competition and recent growth focus on the safer but lower yielding segments to diversify its exposure.
Business Description
AS OF 02 Dec 2024- 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-September 2024, the bank's loan mix by segment consists of 39% corporate, 27% 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 02 Dec 2024- Sluggish economic momentum and challenged SMEs have resulted in still elevated credit costs at KBANK, given its larger SME and Blue scheme 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.
- Loan growth has been middling across the Thai banks due to a focus on quality given elevated household debt and challenged SMEs, and a larger and prolonged balance sheet cleanup at KBANK which is slated to be completed by YE24 (post which credit costs are expected to fall to 140-160 bp in FY25).
- KBANK’s NIM remains high compared to its peers. Its switch to focus on safer segments however is weighing on the NIM, though it has helped to stabilize credit costs.
Key Metric
AS OF 02 Dec 2024| THB mn | FY20 | FY21 | FY22 | FY23 | 9M24 |
|---|---|---|---|---|---|
| PPP ROA | 2.44% | 2.38% | 2.36% | 2.52% | 2.63% |
| ROA | 0.85% | 0.98% | 0.86% | 0.99% | 1.18% |
| ROAE | 7.0% | 8.3% | 7.3% | 8.2% | 9.3% |
| Equity / Assets | 13.4% | 13.1% | 13.4% | 13.9% | 14.2% |
| CET1 Ratio | 15.5% | 15.5% | 15.9% | 16.5% | 17.6% |
| Gross NPL ratio | 3.93% | 3.76% | 3.19% | 3.19% | 3.20% |
| Provisions / Loans | 2.05% | 1.73% | 2.11% | 2.08% | 1.90% |
| Gross LDR | 96% | 93% | 91% | 92% | 88% |
| Liquidity Coverage Ratio | 161% | 174% | 164% | n/m | n/m |
CreditSight View Comment
AS OF 22 Oct 2024Kasikornbank is the 2nd largest bank in Thailand. We are cautious about its one third loan book exposure to SMEs given their challenges, but have liked the bank’s high NIM and strong capital. Credit costs spiked in 4Q22 mainly from the SME book and high yield small ticket lending, and remain elevated in FY24 given the larger SME and Blue scheme book. The bank however has switched to focus on safer segments, which has weighed on the NIM but helped to stabilize credit costs. It has been cleaning up its balance sheet, which should complete by YE24, post which credit costs are expected to fall to 140-160 bp in FY25. Credit costs have been comfortably absorbed thus far. We keep KBANK on M/P and see ~5 bp outside BBL as fair.
Recommendation Reviewed: October 22, 2024
Recommendation Changed: June 09, 2023
Who We Recommend
Starbucks
Export-Import Bank of India
BMO Financial
