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.
