Kasikornbank's NPL up 1bps to 3.84% in Q1

Managament said NPL has already peaked this cycle late last year.

KBANK’s 1Q17 earnings topped Maybank Kim Eng's expectation by 7% (but 4% below consensus) on lower than expected provisions and opex. More importantly, NPLs appeared to have stabilised, easing the market’s concern. But high credit cost may linger this year, putting pressure on the bottom line. 

Here's more from Maybank Kim Eng:

After a disappointing NPL number from KTB, the key focus was on asset quality and KBANK reported only a 1bps increase in NPL from 4Q16 to 3.84%. At the analyst meeting management clearly said NPLs already peaked this cycle late last year.

Management also mentioned that new NPL formation has slowed in both QoQ and YoY terms but did not disclose the actual data. Despite this, we notice NPL resolution remained sluggish and therefore conclude they are likely to stay around the current level for the rest of this year.

However, the bank kept the credit cost at a high level (2.15%). We believe the bank is under pressure to ramp up the coverage ratio to at least 140%, preparing for the IFRS9 in 2019. Lingering high credit cost will pressure earnings, and we look for a mere 3.5% EPS growth for FY17.