Debt repayment from government slows Krung Thai Bank lending growth in 1Q15

Earnings growth will also be slow.

It has been noted that for Krung Thai Bank, slow lending growth in 1Q15 should be expected due to debt repayment from government, while SMEs and retail loan growth is still intact.

According to a research note from Maybank Kim Eng, further, 1Q15 earnings should grow only 3% YoY & 5% QoQ to THB8.5b due to narrower NIM and high OPEX from bonus expenses.

The report noted that according to Maybank Kim Eng's discussion with KTB, the bank expects decent demand for SMEs and retail loans.

NIM could remain under pressure from the recent rate cut and higher deposit base. The bank will put more effort in cross-selling this year as the transformation process for the retail and SME segments are done and implemented in every branch now.

Here's more from Maybank Kim Eng:

Expect 1Q15 earnings of THB8.5b (+3% YoY and 5% QoQ). Loan growth should be driven by high yield SMEs and retail segment (+1-2% YTD) with corporate loans relatively flat and government loans dropping at double digit rate due to the loan repayment in 1Q15.

NIM is expected to drop slightly to 2.73% on the lower loan yield from the rate cut and higher deposit cost from aggressive deposit campaign in 4Q14.

Note that deposits grew 13% QoQ in 4Q14. Non-NII is expected to grow 7% YoY, supported by the strong transactional service and card related fees which could offset the sluggish forex gain.

On the cost side, we expect 8% YoY growth in OPEX due to bonus expenses on cash basis in 1Q15; cost-to-income ratio should pick up slightly YoY to 49.7% this quarter.

Provision expenses should stay low at THB1.9b or 40bps annualized credit cost. PPoP is expected to grow 6% YoY but drop 5% QoQ. We expect KTB to report 1Q15 net profit of THB8.5b or 24% of our FY forecast.