Kasikornbank's earnings down 12% to US$269m in Q2

Blame it on the 16% increase in provisioning expenses.

Maybank Kim Eng cut their FY17-19E earnings by 8% on average after raising our credit cost projection by 30bps to 2.3% higher than the upper bound of the bank’starget of 2.0-2.25%.

"This is the only change in our assumptions this time. NPLs remained flat in 1H17 but this was because the bank stepped up write-offs. We estimate the bank wrote off about THB10b in 1H17 (vs. THB7b in 1H16). We believe KBANK aims to maintain the NPL ratio at the same level. Despite higher write offs and flat NPLs, new NPL formation may still rise. The bank had a credit cost of 2.3% in 1H17 and we expect it to remain elevated in 2H17," the analyst said.

Here's more from Maybank Kim Eng:

2Q17 earnings disappointed, falling by 12% QoQ to THB9b (US$269m), 12% below ours/consensus estimate. This was mainly due to a 16% increase in  provisioning expenses. NPLs were flat but this was due to a high amount of write-offs, and new NPL formation continued to rise, particularlyamong SMEs.

Other components were largely in line. Interestingly, management noted that the chronic deterioration in SME loans has made the bank rethink its lending policy in this segment as now the risk/reward is getting increasingly unattractive. We believe this idea may affect the bank’s loan financial targets next year. We will closely watch this side as it is important for loan growth/NIM.