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Industry Update
Tuesday March 24, 2015
Banking Sector
BANK
Rec : NEUTRAL
KBANK, KTB can still stand economic friction
February net loan growth was thin, which was usual for a low season. However,
1Q15 earnings are projected to grow despite a sluggish core business. We like
KBANK and KTB.

Feb loan growth thin. BAY, TMB, LHBANK, KBANK lead growth
Ten commercial banks under our coverage (except KTB) reported the
Summary Statement of Assets and Liabilities as of February 2015 with
outstanding net loans (after allowance for doubtful accounts) of B7.66tr or the
growth of 0.48%mom and 5.80%yoy. Overall, 2M15 net loan increased 2.75%
from end-2014, which was strong when compared with FY2015 target growth
of 7.00%yoy, led by BAY, TMB, LHBANK, and KBANK. Other banks, on the
other hand, posted lower net loans, mostly mid- and small-cap banks that
focus on car leasing loans, i.e. TCAP, TISCO, and KKP, which were adversely
affected by higher repayment rate than loan launching rate and the banks’
more stringent loan approval policy.

Sector Index : 588.86
SET Index : 1,529.96
Profit recovery expected in 1Q15
We estimate 1Q15 net profit of ten commercial banks under our study to
rebound from B49.2m in 4Q14. BAY, BBL, KBANK, KTB, LHBANK, SCB, and
KKP would show earnings growth from 4Q14, driven by lower operating
expense after a high season passed and lower credit cost. However, the core
business is believed to remain sluggish; NIM is projected to continue
weakening from the prior quarter. Although some banks have reduced their
deposit rate to be consistent with the one-day RP rate cut to 1.75%, they are
reductions of long-term fixed deposit rate, which will take time before they
help lower funding cost. At the same time, although loan rate reductions
(SCB, KBANK, and KTB) are at a lower rate than the deposit rate cuts, it can
immediately affect loan yield in March 2015 and fully in 2Q15. In addition,
loan growth has been thin in 1Q15 owing to a low season. Accordingly, net
interest income and NIM would weaken (before gradually reviving in 2H15 if
there is no further policy rate cut). In terms of fee income, good growth from
the fund management business and bancassurance (TISCO) was not able to
compensate for decreasing loan-related fee income, especially from the carleasing loans.

Top picks are KBANK, KTB
We maintain NEUTRAL for the banking sector. Top picks are
KBANK(FV@B300) for its highest ROE among peers with potential for notable
fee income growth and KTB(FV@B29) for its ROE tends to increase over the
next two years.
FY: Dec 31
Net Profit
EPS (B)
Norm Profit
PER (x)
BVS (B)
PBV (x)
ROAE
ROAA
Source : ASP Research
FY13A
198,372
48.60
245,929
9.4
323.19
1.4
15.91%
1.52%
FY14A
205,927
50.43
260,705
11.8
362.79
1.6
14.71%
1.47%
FY15F
226,238
54.16
289,629
10.9
391.05
1.5
14.53%
1.52%
FY16F
255,546
61.18
324,172
9.6
432.25
1.4
14.86%
1.61%
FY17F
286,829
68.67
362,385
8.6
440.22
1.3
15.74%
1.75%
Usanee Liurut
License No.: 017928
[email protected]
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