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

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.