Comprehensive Analysis of Kasikorn Bank’s (KBANK TB) Performance Date: January 22, 2025 Broker: UOB Kay Hian Overview of Kasikorn Bank (KBANK TB) KBank, the fourth largest commercial bank in Thailand, commands a 14% share of the Thai credit market. It has a strong focus on SME lending, which constitutes 34% of its loan book. The bank continues to be a major player in the financial sector and has shown consistent growth despite challenges in the economic landscape. Stock Recommendation: BUY UOB Kay Hian maintains its BUY recommendation for KBank’s stock with a target price of Bt190. This reflects an upside potential of 18.8% from the current share price of Bt160, making KBank a top pick in the banking sector for 2025. Key Financial Highlights 4Q24 Earnings: Bt10.5 billion, a 12% year-on-year (YoY) increase but down 12% quarter-on-quarter (QoQ). The results exceeded market expectations by 9%. Full-Year 2024 Net Profit: Bt48.6 billion, marking a 14.6% YoY growth. Net Interest Margin (NIM): 3.64% for 2024, slightly below its target of 3.66%. Loan Growth: 0.57% in 2024, significantly below the target of 3%-5%. Non-Performing Loan (NPL) Ratio: Improved to 3.18%, within the target of less than 3.25%. Performance Drivers Strong Non-Interest Income (Non-II) Non-II grew by 2% YoY and 6% QoQ in 4Q24, driven by gains on financial instruments measured at fair value through profit or loss. This contributed significantly to KBank’s overall performance, offsetting a 6% YoY and 2% QoQ decline in net interest income (NII). Credit Cost Concerns While KBank managed to reduce provision expenses by 10% YoY, there was a 5% QoQ increase in 4Q24. Credit cost rose to 197 basis points (bps) in 4Q24, raising concerns. However, the bank expects credit costs to normalize to 140-160 bps in 2025, which aligns with its long-term targets. 2024 Achievements vs Targets Metric 2024 Target 2024 Actual NIM 3.66% 3.64% Loan Growth 3%-5% 0.57% Net Fee Income Growth Mid to High-Single Digit 6.73% Cost-to-Income Ratio Low to Mid-40s 44.09% Credit Cost 175-195 bps 189 bps NPL Ratio (Gross) < 3.25% 3.18% Key Financial Metrics and Forecasts Net Profit KBank is projected to achieve the following net profits over the next few years: 2025F: Bt50.8 billion 2026F: Bt53.4 billion 2027F: Bt55.7 billion Other Key Metrics Dividend Yield: 5.0% (2024), projected to remain above 5% through 2027. Cost-to-Income Ratio: Expected to stabilize around 44% in the coming years. Loan Loss Coverage: Slightly improving, projected at 153.7% in 2025. NPL Ratio: Expected to drop to 3.0% in 2025 and 2.9% in 2027. Valuation and Recommendation UOB Kay Hian values KBank using the Gordon Growth Model, based on a cost of equity of 11% and a long-term growth rate of 2%. This implies a price-to-book (P/B) ratio of 0.75x for 2025F, which is +1.5 standard deviations above its five-year mean. Despite minor concerns over credit costs, KBank’s solid asset quality and strong income streams underpin its positive outlook. The recommendation remains BUY with a target price of Bt190. Environmental, Social, and Governance (ESG) Initiatives Environmental Commitment to net-zero emissions in operations by 2030. Reduction of greenhouse gas emissions in its financial portfolio. Leadership in innovative green finance in Thailand. Social Promoting financial inclusion and literacy. Ensuring customer data security and privacy. Respecting human rights and diversity. Governance Operating under robust corporate governance practices. Delivering services to customers fairly and transparently.