KBANK not comfortable with having a lower coverage ratio than its competitors: analyst

It now stands at 130%.

Despite falling NPLs, 4Q16 earnings (THB10.2b, +87%YoY, -6%QoQ) fell short of Maybank Kim Eng's expectation by 17%, mainly due to higher provisions because we believe KBANK aims to ramp up its coverage ratio to match peers’.

"Accordingly, we cut our FY17F earnings by 14% to reflect lingering high credit cost, leading to an 8% reduction in our GGM-based TP to THB190 (based on 1.28x 17F BV with 13.5% ROE)."

Here's more from Maybank Kim Eng:

4Q top lines were in line with our expectations, but as mentioned higherthan-expected provision expenses (despite falling NPL ratio) were the main reason for our disappointment. This made credit cost for FY16 rise to 2.04%, higher than 1.90% guided earlier. We are not convinced with the reason given by management that provisions should lag NPLs for a year.

Rather we believe the main reason for this is because KBANK is not comfortable with having a lower coverage ratio (now at 130%) than its main competitors BBL and SCB (these two are expected to have more than 160% after 4Q results).

This is especially in light of IFRS9 in 2019 where big banks may be required to have at least 140% coverage ratio, according to our estimate.

Also Read

VPBank’s asset quality at risk amidst housing slowdown

Thailand’s Kiatnakin Phatra Bank’s loan portfolio to benefit from rising car prices

Since you're here...

...there are many ways you can work with us to advertise your company and connect to your customers. Our team can help you dight and create an advertising campaign, in print and digital, on this website and in print magazine.

We can also organize a real life or digital event for you and find thought leader speakers as well as industry leaders, who could be your potential partners, to join the event. We also run some awards programmes which give you an opportunity to be recognized for your achievements during the year and you can join this as a participant or a sponsor.

Let us help you drive your business forward with a good partnership!

I want to download the media kit