Kiatnakin Bank 1Q15 net profit drops 8% YoY to THB664m

Surging NPLs also hit the bank.

Thailand-based Kiatnakin Bank's 1Q15 net profit dropped 8% YoY (+43% QoQ) to THB664m due to
higher provision expenses of THB918m or 200bps credit cost vs 160bps in 1Q14.

According to a research note from Maybank Kim Eng, meanwhile, asset quality remains weak as NPLs from real estate, SMEs and HP increased by 18%, 37% and 6% QoQ.

NPLs plus write-offs hit THB2b in 1Q15 from THB426m in 4Q14. Hence, NPL coverage fell to 74% from 82% in 4Q14.

Here's more from Maybank Kim Eng:

On the revenue side, NII was flat YoY and fell 7% QoQ due to loan contraction of 1.6% QoQ.

Although the bank could reduce funding cost by 10bps QoQ, its NIM fell 20bps QoQ to 3.94% on lower asset yield.

On a less negative note, the bank booked smaller loss on repossession of cars of THB322m compared to THB1.9b in 2014.

We see risk to our earnings forecast of 35% growth this year after 1Q15 earnings accounted for only 19% of our full-year forecast.

We are concerned about its loan quality in real estate and SMEs as the bank focuses on high risk-high yield segments.

Note that real estate loans from non-listed companies are relatively high risk. Although the current valuation is not expensive, there is no positive catalyst in the short term.