Kasikornbank's increased credit cost ceiling may not be fully utilized

It was raised from 170bps to 190bps.

KBANK revised its FY16 financial targets in two categories. First and foremost, the bank revised up the credit cost target for the year by 20bps from “up to 170bps” to “up to 190bps”, though the NPL ratio target was kept unchanged at 3.5-3.6%.

Second, KBANK lowered its net interest margin (NIM) target to 3.3-3.5% this year from 3.4-3.6% previously after the recent cuts in its lending rates by 25bps.

"We leave our NIM projections unchanged as we already incorporated the lending rate cuts in our previous revisions. However, we raise our credit cost projection from 150bps to 170bps. We believe K would like to maintain the coverage ratio at above 130%, to match its peers. But we deem that only 170bps is enough to keep the ratio above that level. While setting the credit cost ceiling at 190bps, the bank may not wholly utilize it. As a result, our FY16F net profit is revised down by 6% to THB38.2b," says Maybank Kim Eng.