Results Review 20 Jan 2017

BUY

Krung Thai Bank PCL (KTB)

TP: Bt22.00

Targets for the new year announced

Closing price: Bt18.40 Upside/downside 19.6%

► 4Q16 net profit fell 13.7% QoQ, but rose 9.9% YoY to

Bt7.4bn. This beat our estimate, but was in line with the Bloomberg consensus. ► Financial targets for 2017 were unveiled, and we estimate KTB’s earnings to grow 8.7% to Bt35.1bn. ► We maintain our BUY recommendation with a 2017 target price of Bt22.00. 4Q16 net profit down QoQ, but up YoY KTB reported a 4Q16 net profit of Bt7.4bn, declining 13.7% QoQ but increasing 9.9% YoY. This beat our estimate but was in line with the Bloomberg consensus. Our projection underestimated the magnitude of net interest income as the bank was able to keep its NIM at a high level of around 3.3%, due to effective funding cost management and the maturity of high-cost deposits. Meanwhile, non-interest income was also up 5.9% YoY, bolstered by higher fee and service income as well as other income. In terms of asset quality, KTB’s 4Q16 NPL ratio leveled down to 3.97% from 4.24% in 3Q16, mainly due to the reclassification of SSI’s NPL. However, this ratio still surged from 3.20% at the end of 2015, hit by loan contraction and rising NPLs from the SME segment. As of 2016, the bank’s loans dropped 6.1% YoY corresponding with its stricter credit policy as well as weak demand in all sectors. FY17 targets unveiled KTB tentatively announced its financial targets for this year and it targets loans to grow 4-6%, based on an assumption of 3.4% GDP growth. Fee income growth is estimated to stay in the range of 35%. The bank also aims to keep its NPL ratio at around the same level as FY16’s 3.97%. Regarding our model, we assume KTB’s loan growth at 7% given our expectation of stronger loan demand prompted by infrastructure investment and brighter economic sentiment. We similarly project fee income to increase 5%. We expect the NPL ratio to see an improvement and decrease slightly to 3.8%, owing to steady loan expansion and improvement in borrowers’ ability to repay debt. Overall, we forecast KTB’s FY17 earnings at Bt35.1bn, up 8.7% YoY.

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Sector Banking Paid-up shares (shares mn) 13,976 Market capitalization (Bt mn) 257,160 Free float (%) 44.93 12-mth daily avg. turnover (Bt mn) 880.92 12-mth trading range (Bt) 19.50/16.20 Major shareholders (%) Fin. Institution Development Fund Thai NVDR State Street Bank Europe Ltd.

55.1 5.2 3.0

Financial highlights Revenue (Btmn) Net profit (Btmn) EPS (Bt) EPS growth (%) P/E (x) BVPS (Bt) P/BV (x) DPS (Bt) Div. yield (%) ROE (%)

2015 2016 2017E 2018E 116,607 124,668 129,975 140,573 28,494 32,278 35,081 39,574 2.0 2.3 2.5 2.8 -14.2 13.3 8.7 12.8 9.0 8.0 7.3 6.5 17.6 19.6 22.1 24.9 1.0 0.9 0.8 0.7 0.8 0.9 1.0 1.1 4.1 5.0 5.5 6.2 11.9 12.4 12.0 12.0

Source: SETSMART, AWS

Thailand Research Department Mr. Warut Siwasariyanon, License, No. 17923 Tel: 02 680 5041 Ms. Veeraya Rattanaworatip, Assistant Analyst

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Results Review 20 Jan 2017 Maintain BUY recommendation We maintain our BUY recommendation with a 2017 target price of Bt22.00, based on a prospective PBV of 1.0x (Gordon Growth Model). After a year of loan contraction, we expect KTB to be more aggressive in expanding its lending activity this year as there would be less pressure from asset quality as well as strong credit demand ahead. Apart from that, KTB is trading at a cheap PBV of 0.8x and offers a very attractive dividend yield of 5.5%

Figure 1: KTB’s 4Q16 results review Unit: Btmn Net interest income

4Q15

3Q16

4Q16

%QoQ

%YoY

2015

2016

%YoY

21,399

21,595

21,853

1.2%

2.1%

80,868

86,966

7.5%

Non-interest income

9,301

9,942

9,849

-0.9%

5.9%

35,740

37,702

5.5%

Net operating income

30,700

31,538

31,702

0.5%

3.3%

116,607

124,668

6.9%

Non-interest expense

13,431

13,140

13,036

-0.8%

-2.9%

50,920

50,638

-0.6%

Pre-provision profit

17,269

18,397

18,666

1.5%

8.1%

65,688

74,030

12.7%

Provision expense

8,849

7,636

9,429

23.5%

6.6%

30,542

33,429

9.5%

Pre-tax profit

8,420

10,761

9,237

-14.2%

9.7%

35,146

40,601

15.5%

Net profit

6,767

8,620

7,440

-13.7%

9.9%

28,494

32,278

13.3%

EPS (Bt)

0.48

0.62

0.53

-13.7%

9.9%

2.04

2.31

13.3%

Loans

2,027,440

1,906,053

1,904,089

-0.1%

-6.1%

2,027,440

1,904,089

-6.1%

Deposits

2,135,499

1,973,357

1,972,404

0.0%

-7.6%

2,135,499

1,972,404

-7.6%

2.95%

3.24%

3.30%

6bps

35bps

3.02%

3.30%

28bps

NIM

Source: Company data, AWS estimates

Figure 2: KTB’s FY17 financial targets Key ratios

2017 Target

GDP growth (Forecast)

3.40%

Loan growth

4-6%

Fee income growth

3-5%

NPLs ratio (gross)

Maintain

ROA

Maintain

ROE

Maintain

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Results Review 20 Jan 2017

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Results Review 20 Jan 2017

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CG Report Corporate Governance Report of Thai Listed Companies (CGR). CG Rating by the Thai Institute of Directors Association (IOD) in 2015.

Corporate Governance Report disclaimer

Score

Range Number of Logo

Description

90 – 100

Excellent

80 – 89

Very Good

70 – 79

Good

60 – 69

Satisfactory

50 – 59 Below 50

Pass No logo given

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N/A

The disclosure of the survey result of the Thai Institute of Directors Association (“IOD”) regarding corporate governance is made pursuant to the policy of the Office of the Securities and Exchange Commission. The survey of the IOD is based on the information of a company listed on the Stock Exchange of Thailand and the Market for Alternative Investment disclosed to the public and able to be accessed by a general public investor. The result, therefore, is from the perspective of a third party. It is not an evaluation of operation and is not based on inside information. The survey result is as of the date appearing in the Corporate Governance Report of Thai Listed Companies. As a result, the survey result may be changed after that date, Asia wealth Securities Company Limited does not conform nor certify the accuracy of such survey result.

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CG Report ข้ อมูล Anti-Corruption Progress Indicator ของบริษัทจดทะเบียน ระดับ 1 ACD BLISS CTW GRAND MAJOR PICO SAUCE SPPT TKS TWP WG

AEONTS BMCL DCON GUNKUL MATCH PK SAWAD SPVI TNH TWZ

AFC BOL DRACO HFT MAX PL SAWANG STA TNPC U

AIRA BRR DSGT HTECH M-CHAI PPM SCN STAR TPA UMS

AJ BSBM

ALUCON CBG DTCI IHL ILINK MDX MIDA PRAKIT PRECHA SEAFCO SF SVH SVOA TPAC TPOLY UPA UPOIC

AMC CCET E ITD ML PRIN SHANG SWC TRC UTP

AQUA CCN EMC JSP MPIC PSTC SIRI TAPAC TRUBB UVAN

ARIP CGD ESSO KDH NC PYLON SMART TC TSE VARO

AUCT CMR FOCUS KTIS NEP RAM SMM TCCC TTA VI

BAT-3K CPH FSMART KTP NNCL RICH SOLAR TCJ TTI VIBHA

BIG CSC GIFT LEE NWR RS SPACK TCOAT TTL VIH

BJC CSP GLAND LST OHTL SANKO SPG TH TTTM VTE

ABICO BTNC IEC MBK PRINC TAKUNI TSI

AF CCP IFS MBKET QH TEAM TTW

AKP CI INET MEGA ROCK TF TVD

AMARIN CSR JUTHA MK RPC TIC TVO

AMATA CSS KASET MPG S&J TIP UKEM

AOT EFORL KCAR MTLS SGP TIPCO UNIQ

APCO EPCO KKC NCH SIAM TMC UWC

AYUD FE KSL NCL SIS TMI VNG

BEAUTY FNS L&E NPP SKR TPP WIIK

BFIT FVC LALIN OCC SMG TRT WIN

BH GEL LTX OCEAN SMIT TRU XO

BKD GLOBAL M PB SORKON TRUE

ACAP ASIAN CNT EE INSURE MCOT OGC RATCH SMK SYNTEC TMT

ADVANC ASIMAR COL EVER IRC MFC PACE RML SMPC TASCO TSTE

AEC BIGC CPALL FPI JAS MFEC PCSGH ROBINS SPALI TCMC TSTH

AGE BROOK CPF GBX JTS MINT PDI ROJNA SPC TFI TTCL

AH BTS CPI GC JUBILE MJD PG RWI SPCG THAI TU

AIE BWG CPL GFPT KC MONO PHOL SAMCO SPI THRE TVI

AMANAH CEN DELTA GLOW KTC MOONG PLAT SCCC SRICHA THREL UOBKH

ANAN CENTEL DEMCO HMPRO KYE NBC PPS SCG SSI TICON UREKA

AP CFRESH DIMET HOTPOT LHK NDR PR SEAOIL STANLY TKT VGI

APCS CHARAN DNA ICC LPN NINE PRANDA SE-ED SUPER TLUXE VNT

APURE CHO DTAC ICHI LRH NMG PREB SENA SVI TNL WACOAL

AS CHOTI EA IFEC MAKRO NSI PS SINGER SYMC TPCORP WHA

AHC CHG FIRE KWC OISHI QTC SMT TFD TSR WINNER

AI CHOW FMT LH OTO RCI SPA TGCI TT YUASA

AIT CIG FORTH LIT PAF S11 SPORT TGPRO TYCN

AKR CITY GENCO LOXLEY PAP SALEE SSC THANA UAC

ARROW CK GL MACO PATO SAM SST THIP UBIS

ASK CKP GOLD MANRIN PF SAMART STEC TIW UEC

BA COLOR GPSC MATI PJW SAMTEL STPI TK UMI

BDMS CWT GRAMMY MODERN PLANB SAPPE SUC TMW UP

BEC EARTH HYDRO MSC PLE SC SUTHA TNDT UPF

BECL EASON IRCP NOBLE POLAR SCP T TOPP UT

BJCHI EPG IT NOK PRG SFP TAE TPC UV

BUI F&D JCT NPK PTL SIM TBSP TPCH VPO

BAFS ECL KKP SSF

BANPU EGCO KTB SSSC

BAY ERW LANNA TCAP

BBL FSS LHBANK THCOM

BKI GCAP MTI TISCO

BLA HANA NKI TIMB

CIMBT HTC PSL TMD

CNS INTUCH PTG TNITY

CSL IRPC PTTEP TOG

DCC IVL SABINA

DRT KBANK SCB

DTC KCE SNC

CPN

GYT

PE

PM

PPP

PT

PTT

PTTGC

SAT

SCC

THANI

TOP

AQ KAMART PMTA

BCH KBS POST

BGT KIAT RCL

BROCK LDC RICHY

BSM MBAX ROH

BTC MCS S

CHUO METCO SIMAT

CPR NEW TCB

CRANE NEWS TR

EIC NYT TSF

ระดับ 2 2S BLAND HEMRAJ MALEE PCA SUSCO TSC

ระดับ 3A ABC ASIA CM ECF INOX MC NTV QLT SITHAI SYNEX TMILL ZMICO

ระดับ 3B AAV CGH FANCY KCM NUSA Q-CON SLP TCC TPIPL WAVE

ระดับ 4 ASP EASTW KGI SNP

ระดับ 5 BCP

ไม่เปิ ดเผยหรือไม่มีนโยบาย A FER PAE TVT

ACC JMART PDG WORK

AJD JMT PERM

หมายเหตุ ระดับ 1 : มีนโยบาย ระดับ 2 : ประกาศเจตนารมณ์ ระดับ 3 : มีมาตรการป้องกัน ซึ่งทัง้ 2 กรณี ถือเป็ นผลการประเมินในระดับเดียวกัน 3A : บริษทั มีการประกาศเจตนารมณ์เข้าร่วมโครงการ CAC หรือภาค 3B : บริษทั มีคามัน่ และนโยบายของบริษทั แต่มไิ ด้ประกาศเจตนารมณ์เข้าร่วมโครงการ CAC หรือภาค ระดับ 4 : ได้รบั การรับรอง ระดับ 5 : ขยายผลสูผ่ ทู้ เ่ี กีย่ วข้อง

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Contact/Disclaimer Branch

Address

540 Floor 7,14,17 , Mercury Tower, Ploenchit Road, Lumphini,

Head Office

Phone

Fax

02-680-5000

02-680-5111

02-630-3500

02-630-3530-1

02-261-1314-21

02-261-1328

02-884-7333

02-884-7357,

Pathumwan Bangkok 10330 191 Silom Complex Building,21st Floor Room 2,3-1 Silom Rd., Silom,

Silom

Bangrak, Bangkok, 10500 Thailand 159 Sermmitr Tower, 17th FL. Room No.1703, Sukhumvit 21 Road,

Asok

Klong Toey Nua, Wattana, Bangkok 10110 7/3 Central Plaza Pinklao Office Building Tower B, 16th Flr., Room Pinklao

No.1605-1606 Baromrajachonnanee Road, Arunamarin, Bangkoknoi,

02-884-7367

Bangkok 10700 Chaengwattana

99/99 Moo 2 Central Plaza Chaengwattana Office Tower, 22nd Flr., Room 02-119-2300

02-835-3014

2204 Chaengwattana Road, Bang Talad, Pakkred, Nonthaburi 11120

Chaengwattana 2

9/99 Moo 2 Central Plaza Chaengwattana Office Tower, 22nd Flr.,

02-119-2388

02-119-2399

02-106-7345

02-105-2070

Room 2203 Chaengwattana Road, Bang Talad, Pakkred, Nonthaburi 11120 Mega Bangna

39 Moo6 Megabangna, 1st Flr., Room 1632/7 Bangna-Trad Road, Bangkaew Bangplee, Samutprakarn 10540

Rayong

Khonkaen

356/18 Sukhumvit Road, Nuen-Phra Sub District, Muang District, Rayong 038-808200

038-807200

Province 21000 043-334-700

043-334-799

55/22 Moo 1, Samed Sub District, Muang District, Chonburi 20000

038-053-858

038-784-090

233-233/2 Moo2 1st Flr., Sukprayoon Road, Na Meung Sub-District,

038-981-587

038-981-591

26/9 Srijanmai Road, Tamboonnaimuang, Khon Khaen 40000

Chonburi

Chaseongsao

Meung District, Chachoengsao 24000

Asia Wealth, Empower Your Wealth

Call Center 02-680-5000

This Report has been prepared by Asia Wealth Securities Company Limited (”AWS”). The information in here has been obtained from sources believed to be reliable and accurate, but AWS makes no representation as to the accuracy and completeness of such information. AWS does not accept any liability for any loss or damage of any king arising out of the use of such information or opinions in this report. Before making your own independent decision to invest or enter into transaction, investors should study this report carefully and should review information relating. All rights reserved. This report may not be reproduced, distributed or published by any person in any manner for any purpose without permission of AWS. Investment in securities has risks. Investors are advised to consider carefully before making investment decisions.

Results Review - Asia Wealth

Jan 20, 2017 - ... owing to steady loan expansion and improvement in borrowers' ability to repay debt. Overall, we forecast KTB's FY17 earnings at Bt35.1bn, up 8.7% YoY. BUY. TP: Bt22.00. Closing price: Bt18.40. Upside/downside 19.6%. Sector. Banking. Paid-up shares (shares mn). 13,976. Market capitalization (Bt mn).

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