AECS Equity Research

KBANK TB
Kasikorn Bank

Earnings for 4Q13 in line with expectation Frida y , Ja n ua ry 1 7 , 20 14

KBANK reported 4Q13 net profits in line with our expectation. Loan
growth continued with drivers from commercial and credit-card
BUY
lending. While operating expenses rose due to seasonality, credit Target THB197.50
costs were stable QoQ. We maintain our BUY rating with a target Close THB166.00
price of Bt197.50 (1.92x P/BV). KBANK is our top pick for the sector Up/ Downside +20%
given its continued EPS growth and well-diversified portfolio. Revision Unchanged

Company Information
Sector: Banks
4Q13 net profits of Bt9.5bn (+24% YoY but -11% QoQ): The Shares outstanding (m): 2,393.26
results were in line with our expectation and those of the Market capitalization (Btm): 397,281.19
consensus. A QoQ decline in profits resulted from a rising Trading vol/day (Btm): 1,426.37
cost-to-income ratio of 48.6% from 44% in 3Q13. The bank’s Free float (%): 69.80%
Beta: 1.11
2013 net profits came in at Bt41.3bn or a rise of 17% YoY.
Sustaining both NII and non-NII growth: In 4Q13, NII growth Major Shareholders
was 12.7% YoY and 3.4% QoQ driven by loan growth of 8.7% Thai NVDR 26.73%
State Street Bank Europe Ltd. 8.54%
YoY and 1.9% QoQ. Credit expansion in the last quarter came State Street Corp. 4.37%
from commercial, credit-card and trade finance loan facilities.
Meanwhile, non-NII increased 21% YoY but dropped 2.8% QoQ
due to a QoQ decline in dividend income and insurance
Consensus Bloomberg
premium.
2014F EPS (Bt): 19.25
Operating expenses rose as expected: KBANK’s Cost-to- Target price (Bt): 209.66
income ratio rose QoQ on seasonal operating-expense
Price Performance
changes. However, 2013 ratios were 44%, in line with our
52 Wk high/low: 225.0 / 145.5
estimate. Its 4Q13 credit cost of 84bp also corresponded with
our forecast and its NPL/TL ratio was flat QoQ at 2%. 1M 3M 1Y YTD
Absolute (%) -2.1 -12.2 -14.1 -14.7
Top pick of the sector: We maintain our BUY rating on KBANK
Relative (%) 0.6 -0.8 -5.7 -8.2
based on a December-2014 target price of Bt197.50. We like
KBANK because of its continued earnings growth, well- (Bt/Shr) (%)
diversified portfolio and high ROE among its large-bank peers. 250 150
200
FY Ended 31 Dec 2011 2012 2013 2014E 2015E 150 100
PPOP (Btm) 47,489 57,371 68,047 74,624 82,966 100 50
Provisions (Btm) 7,346 8,390 11,743 13,313 14,378 50
Net profit (Btm) 24,226 35,260 41,325 45,351 50,988 0 0
Apr-13
May-13

Aug-13
Jul-13

Oct-13
Nov-13
Dec-13
Mar-13
Jan-13

Jun-13

Jan-14
Feb-13

Sep-13

EPS (Bt) 10.12 14.73 17.27 18.95 21.31

EPS growth (% YoY) 21 46 17 10 12
Book value (Bt) 64.68 77.28 91.60 104.57 120.61 KBANK TB Relative price to SET

Dividend (Bt) 2.50 3.00 4.32 4.74 5.33

FY Ended 31 Dec 2011 2012 2013 2014E 2015E

CGR 2012:
PER (x) 12.1 13.1 9.0 8.8 7.8
PBV (x) 1.9 2.5 1.7 1.6 1.4 Analyst
Dividend Yield (%) 2.0 1.6 2.8 2.9 3.2 Weerapat Wonk-urai
ROE (%) 16.7 20.8 20.6 19.3 18.9 weerapat.w@aecs.com
Tel: 662-659-3380
Figure 1: Quarterly performance
QUARTERLY INCOME STATEMENT
Year End Dec (Bt, m) 4Q12 1Q13 2Q13 3Q13 4Q13 % YoY % QoQ 2013 2012 % YoY
Interest income 25,218 25,088 26,053 27,158 27,927 10.7 2.8 106,226 96,174 10.5
Interest expenses (8,225) (7,883) (8,121) (8,641) (8,783) 6.8 1.6 (33,428) (32,593) 2.6
Net interest income 16,994 17,205 17,931 18,517 19,144 12.7 3.4 72,797 63,581 14.5
Non-interest income 19,819 23,370 24,609 24,778 24,080 21.5 (2.8) 96,837 80,914 19.7
Operating expenses (23,371) (23,360) (25,009) (25,878) (27,341) 17.0 5.7 (101,588) (87,124) 16.6
Pre-provision operating profit 13,441 17,215 17,532 17,417 15,883 18.2 (8.8) 68,047 57,371 18.6
Provision expenses (2,648) (3,525) (2,200) (2,983) (3,035) 14.6 1.7 (11,743) (8,390) 40.0
Corporate tax (2,522) (2,743) (3,335) (2,778) (2,601) 3.1 (6.4) (11,457) (11,136) 2.9
Minority interest 578 842 1,018 942 720 24.4 (23.6) 3,522 2,585 36.2
Net profit 7,692 10,106 10,979 10,713 9,527 23.9 -11.1 41,325 35,260 17.2
EPS 3.21 4.22 4.59 4.48 3.98 23.9 (11.1) 17.27 14.73 17.2

Year End Dec (Bt, m) 4Q12 1Q13 2Q13 3Q13 4Q13

Loan growth (% YoY) 9.6 11.1 10.8 10.0 8.7
Loan growth (% YTD) 9.6 2.1 4.8 6.6 8.7
Deposit growth (% YoY) 12.0 9.4 10.7 11.0 10.0
Net interest margin (%) 3.5 3.5 3.5 3.5 3.6
Cost-to-income ratio (%) 50.7 40.4 43.0 44.2 48.6
Credit cost (bps) 79 103 63 84 84
Effective tax rate (%) 18.8 15.9 19.0 16.0 16.4
LDR+borrowing (%) 90.4 90.3 89.7 86.9 90.6
NPL/TL ratio (%) 2.1 2.0 2.0 2.0 2.0
Tier 1 Capital ratio (%) 10.4 11.5 11.4 13.1 12.6
ROE (%) 16.9 21.2 22.2 20.9 17.8
ROA (%) 1.5 1.9 2.0 1.9 1.7

Source: Company data and AECS Research

Friday, January 17, 2014 Page 2 of 4

 Financial tables
INCOME STATEMENT QUARTERLY INCOME STATEMENT
Year End Dec (Bt, m) 2011 2012 2013 2014F 2015F Year End Dec (Bt, m) 4Q12 1Q13 2Q13 3Q13 4Q13
Interest income 83,693 96,174 106,226 111,882 120,098 Interest income 25,218 25,088 26,053 27,158 27,927
Interest expenses 27,202 32,593 33,428 35,814 38,187 Interest expenses 8,225 7,883 8,121 8,641 8,783
Net int erest income 56,491 63,581 72,797 76,068 81,911 Net int erest income 16,994 17,205 17,931 18,517 19,144
Non-interest income 65,725 80,914 96,837 105,943 114,526 Non-interest income 19,819 23,370 24,609 24,778 24,080
Operating expenses 74,726 87,124 101,588 107,387 113,472 Operating expenses 23,371 23,360 25,009 25,878 27,341
Pre-provision operat ing profit 47,489 57,371 68,047 74,624 82,966 Pre-provision operat ing profit 13,441 17,215 17,532 17,417 15,883
Provision expenses 7,346 8,390 11,743 13,313 14,378 Provision expenses 2,648 3,525 2,200 2,983 3,035
Corporate tax 13,962 11,136 11,457 12,262 13,718 Corporate tax 2,522 2,743 3,335 2,778 2,601
Minority interests 1,957 2,585 3,522 3,698 3,883 Net profit bef. Ext ra 7,692 10,106 10,979 10,713 9,527
Net profit bef. Ext ra 24,226 35,260 41,325 45,351 50,988 Net profit / 7,692 10,106 10,979 10,713 9,527
Net profit 24,226 35,260 41,325 45,351 50,988
Loan growth (% YoY) 9.6 11.1 10.8 10.0 8.7
BALANCE SHEET Deposit growth (% YoY) 12.0 9.4 10.7 11.0 10.0
Year End Dec (Bt, m) 2011 2012 2013 2014F 2015F Net interest margin (%) 3.5 3.5 3.5 3.5 3.6
Cash 53,211 35,127 40,610 38,173 41,068 Cost to income ratio (%) 50.7 40.4 43.0 44.2 48.6
Interbank & money market 111,969 249,979 203,282 223,611 245,972 ROE (%) 16.9 21.2 22.2 20.9 17.8
Investments 264,133 382,163 496,567 518,913 542,264 ROA (%) 1.5 1.9 2.0 1.9 1.7
Loan and receivables, net 1,172,596 1,285,310 1,396,807 1,497,267 1,607,585
Land, premises & equipment, net 38,660 40,565 40,839 44,106 47,634 KEY FINANCIAL RATIO
Goodwills and intangible assets 18,805 21,962 23,212 25,069 27,074 Year End Dec (Bt, m) 2011 2012 2013 2014F 2015F
Other assets 36,098 39,364 49,263 51,803 54,475 Grow th (%)
Tot al asset s 1,722,940 2,077,442 2,290,045 2,439,271 2,610,216 Interest income 33.4 14.9 10.5 5.3 7.3
Deposit 1,242,229 1,391,380 1,529,835 1,636,924 1,751,508 Non-interest income 13.4 23.1 19.7 9.4 8.1
Interbank & money market 53,340 174,004 167,403 142,292 128,063 Net profit 20.8 45.5 17.2 9.7 12.4
Derivative liabilities 27,436 20,140 35,463 40,783 40,171 EPS 20.8 45.5 17.2 9.7 12.4
Total borrowings 70,303 87,394 71,518 78,669 86,536
Provisions 12,789 16,970 17,050 18,414 19,887 Margin & Efficiency ratios (%)
Life policy reserve 97,597 125,856 160,239 173,058 190,364 Yield 5.53 5.40 5.16 5.02 5.02
Other liabilities 36,926 41,189 44,843 48,430 53,273 Funding costs 2.17 2.34 2.17 2.16 2.15
Tot al liabilit ies 1,555,974 1,876,621 2,053,038 2,169,627 2,300,453 Net interest margin 3.73 3.57 3.53 3.41 3.42
Paid-up capital 23,933 23,933 23,933 23,933 23,933 Cost to income ratio 48.0 45.3 44.2 43.9 43.3
Share premium 18,103 18,103 18,103 18,103 18,103 Non-NII/operating income 53.8 56.0 57.1 58.2 58.3
Retained earnings 101,829 128,743 163,019 194,765 233,005 Effective tax rate 34.8 22.7 20.3 20.0 20.0
Others 10,934 14,166 14,178 13,469 13,604
Minority interests 12,167 15,876 17,775 19,375 21,119 Profitability ratio (%)
Tot al equit y 154,799 184,946 219,232 250,269 288,645 Pre-provision ROE 32.8 33.8 33.7 31.8 30.8
Tot al liabilit ies & equit y 1,722,940 2,077,442 2,290,045 2,439,271 2,610,216 ROE 16.7 20.8 20.4 19.3 18.9
ROA 1.5 1.9 1.9 1.9 2.0
QUARTERLY BALANCE SHEET
Year End Dec (Bt, m) 4Q12 1Q13 2Q13 3Q13 4Q13 Financial stability ratio (%)
Cash 35,127 30,715 35,293 34,395 40,610 LDR+borrowing 92.9 90.4 90.6 91.3 92.0
Interbank & money market 249,979 284,484 262,543 241,810 203,282 NPL/TL (gross) 2.3 2.1 2.0 2.0 2.0
Loan and receivables, net 1,285,310 1,312,122 1,346,666 1,370,607 1,396,807 Tier 1 capital 9.6 10.4 12.6 10.1 10.5
Land, premises & equipment, net 40,565 40,634 39,750 40,326 40,839
Other assets 61,326 61,884 69,981 63,235 72,474 Per share (Bt)
Tot al asset s 2,077,442 2,109,967 2,225,152 2,240,034 2,290,045 EPS 10.12 14.73 17.27 18.95 21.31
Deposit 1,391,380 1,428,318 1,467,058 1,552,217 1,529,835 DPS 2.50 3.00 4.32 4.74 5.33
Interbank & money market 174,004 131,167 191,071 117,205 167,403 BV 64.68 77.28 91.60 104.57 120.61
Total borrowings 87,394 84,572 95,517 87,559 71,518
Tot al liabilit ies 1,876,621 1,896,632 2,007,654 2,013,315 2,053,038 KEY ASSUMPTION
Paid-up capital 23,933 23,933 23,933 23,933 23,933 Year End Dec (Bt, m) 2011 2012 2013 2014F 2015F
Share premium 18,103 18,103 18,103 18,103 18,103 Loan growth (% YoY) 12.8 9.6 8.6 6.5 8.0
Retained earnings 128,743 138,880 143,905 153,452 163,019 Net interest margin (%) 3.73 3.57 3.53 3.41 3.42
Others 14,166 14,961 14,309 13,570 14,178 Non-NII growth (% YoY) 13.4 23.1 19.7 15.8 8.1
Minority interests 15,876 17,458 17,247 17,661 17,775 Credit cost (bps) 60 63 81 85 85
Tot al equit y 184,946 195,877 200,250 209,058 219,232 Cost to income ratio (%) 48.0 45.3 44.2 43.9 43.3
Tot al liabilit ies & equit y 2,077,442 2,109,967 2,225,152 2,240,034 2,290,045 Dividend payout (%) 25 20 25 25 25

PER Band PBV Band

(X)
(X)
3.0

15 +1 S.D.

2.5
12 +1 S.D.

Avg.
9 2.0
Avg.
-1 S.D.
6
-1 S.D. 1.5
3

0 1.0
Oct-10

Oct-11

Oct-12

Oct-13
Jan-10

Jan-11

Jan-12

Jan-13

Jan-14
Apr-10

Apr-11

Apr-12

Apr-13
Jul-10

Jul-11

Jul-12

Jul-13

May-10

May-11

May-12

May-13
Jan-10

Sep-10

Jan-11

Sep-11

Jan-12

Sep-12

Jan-13

Sep-13

Jan-14

Friday, January 17, 2014 Page 3 of 4

 AECS Investment Research – Recommendation Definitions

Sector Recommendations Stock Recommendations

OVERWEIGHT: The industry, as defined by the analyst’s BUY: Expecting positive total returns of 15% or more
coverage universe, is expected to outperform the over the next 12 months.
relevant primary market index by at least 10% over the
next 12 months.

NEUTRAL: The industry, as defined by the analyst’s HOLD: Expecting total returns of not more than -10% to
coverage universe, is expected to perform in line with +10% over the next 3 months.
the relevant primary market index over the next 12
months.

UNDERWEIGHT: The industry, as defined by the SELL: Expecting negative total returns of 15% or more
analyst’s coverage universe, is expected to over the next 12 months
underperform the relevant primary market index by 10%
over the next 12 months.

Disclaimers

The disclosure of survey results from the Thai Institute of Directors Association (IOD) regarding corporate
governance is in accordance with the policy of the Office of the Securities and Exchange Commission of Thailand.
The IOD survey is based on information from a company listed on the Stock Exchange of Thailand and/or the
Market for Alternative Investment as a matter of public record and is accessible by general public investors.
Therefore, the survey result comes from the perspective of a third party. It does not represent an evaluation of
operations neither is it based on inside information.

The survey result given pertains to the date appearing in the IOD’s Corporate Governance Report of Thai Listed
Companies. As a result, the survey may be subject to change after that date. AEC Securities Plc. (AECS) neither
confirms nor certifies the accuracy of such survey results.

The opinions and information contained herein are based on sources believed to be reliable, but AECS does not
guarantee their accuracy, completeness or correctness. This information is not to be construed as an offer,
invitation or solicitation to buy or sell the securities covered in this report. AECS accepts no liability whatsoever for
any direct, indirect or consequential loss arising from any use of this document or its contents.

AEC Securities Public Company Limited

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Tel. 02 659 3376 Fax 02 659 3390

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Friday, January 17, 2014 Page 4 of 4