Krungthai Bank 3Q14 net profit climbs 23% q-q to THB9.3bn

Lower provisions were stated as the reasons.

Thailand-based Krungthai Bank reported a net profit of THB9.3bn in 3Q14 (+4% y-y, +23% q-q), largely in line with Nomura's and consensus estimates, due to lower provisions as the bank set aside additional provisions of THB3bn in 2Q14.

According to a research note from Nomura, meanwhile, 9M14 results were 74% of its full-year forecast.

Nomura said further that it sees no upside risk to earnings at this point. On the other hand, downside risk could come from additional provisions in 4Q14.

Here's more from Nomura:

Total revenue was flat q-q, +3% y-y, as a result of flat loan growth (-0.5% q-q, +7.2% y-y) and marginal NIM contraction (-2bps q-q). YTD loan growth was 5%, likely to meet the bank’s full-year target of 7% (vs our estimate of 8%).

NIM contracted from slightly higher funding cost due to a deposit campaign. Fee income was 3% weaker q-q (+3% y-y), as lending and trade finance were inactive in the quarter.

Gross NPLs at the consolidated level rose by THB5.4bn (+9% q-q) from housing and small SMEs. The NPL ratio rose slightly to 3.1%, from 3.0% at end-2Q14.

Reserve coverage fell to 108%, from 113% at end-2Q14. We assume 70bp credit cost for KTB this year, vs 72bps set aside in 2013. The bank’s normalised provision expenses are THB700m/month, vs our estimate of c.THB3bn provisions in 4Q14.

We keep our current FY14F net profit forecast of THB33.8bn unchanged; however, we note that there could be downside risk if KTB were to set aside additional provisions in 4Q14.

Apart from that, we view KTB’s performance so far as largely in line with what we expected. We maintain our Buy call, with a PT of THB28, implying 1.6x FY15F P/B.