Kasikornbank PCL: Recovery play (and cheap)

  • Lighter LLPs for 2021, driven by recovery from COVID-19 effects
  • Strong 2021 loan growth, driven by retail and commercial biz
  • Strong Non-NII growth and a lower cost/income ratio

We are bullish over KBANK’s prospects. Our profit forecasts are Bt9.3bn for 2Q21 (up 327% YoY) and Bt38.3bn for 2021 (up 30% YoY), driven by lighter LLPs and strong loan growth. And the stock is cheap (the price is still down 12% since March 31)—a YE21 PBV of 0.6x (2.0SDs below its long-term mean) and a 2021 PER of 7.9x (the range for our Bank coverage is 7.9x-12.0x). BUY!

Lighter LLPs for 2021, driven by recovery from COVID-19 effects

Our KBANK’s 2021 LLP assumption is Bt37.8bn, down 13.3% YoY, due to a gradual recovery from COVID-19 effects through 2H21—mass vaccinations, BOT measures (soft loans, asset-warehousing, debt servicing holidays, etc, through to end-June 2021 for SMEs and to YE21 for retail clients). Management’s 2021 credit cost peg is 160bps (in line with our assumption). KBANK says it will maintain this peg, so long as GDP growth is more-or-less in line with its in-house forecast 2%. The bank’s end-March 2021 loan loss coverage ratio was high at 137.4% and management is confident that the NPLs/loans ratio will remain within the 4.0-4.5% range through to YE21 (our assumption is 4.0%).

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