Kasikornbank net interest income climbs 3% QoQ in 3Q14

Thanks to unexpectedly better NIM.

Thailand-based Kasikornbank's net interest income rose 3% QoQ on better-than-expected NIM of 3.79% vs Maybank Kim Eng’s forecast of 3.73% on lower funding cost from a high CASA ratio of 67%.

According to a research note from Maybank Kim Eng, meanwhile, loan growth was 2% QoQ and 4.3% YTD.

Further, non-interest income grew 6% QoQ on better banking fees and capital market related fees.

Cost-to-income ratio fell to 42% from 44% in 2Q14, thanks to good cost control and strong revenue growth.

Maybank Kim Eng expects OPEX to peak in 4Q due to additional expenses from the K-transformation project.

Here’s more from Maybank Kim Eng:

Stable asset quality. Provisions edged up 21% QoQ to THB3.7b or 100bps, higher than our forecast of THB3.1b.

NPL rose to THB35b from THB34b in 2Q14. NPL ratio and coverage ratio remain stable at 2.33% and 142%.

In sum, PPoP grew 9% QoQ and 19% YoY while earnings grew 17% YoY and 7% QoQ to THB12.5b (EPS: THB5.23).

Top Pick in banking sector. Maintain BUY on KBANK due to its resilient earnings on high NIM and strong cross-selling platform to generate non-interest income.

KBANK has a well-balanced loan portfolio and the highest level of low-cost funding CASA in the sector.

Stock is currently trading at 10x 2015 PER and 1.8x P/BV. Our TP implies 2.1x P/BV and 19% ROE.