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Krung Thai Bank Pcl (SET:KTB), a 55.05% stake owned by the Financial Institutions Development Fund (FIDF) that is part of the Bank of Thailand (BOT) with a separate legal entity, is Thailand's second largest commercial bank with total assets of 2.75 trillion baht at the end of fiscal year 2015. The Bank is organized into three business segments: retail banking, wholesale banking, and treasury and investments. Krung Thai Bank operates its business through a nationwide branch network and overseas branches in the United States, India, Singapore, Cambodia, People’s Democratic Republic of Lao, Myanmar, and the Cayman Islands.
Krung Thai Bank said on April 21, 2016, that its first-quarter 2016 revenues were 30.72 billion baht, beating the 29.12 billion baht consensus estimate of 6 analysts, according to the Financial Times. The company posted first-quarter 2016 earnings of 0.54 baht per share, exceeding the 0.50 baht per share consensus estimate of 6 analysts. The bank said its first-quarter net profit dropped 4.36% from a year earlier, due to skyrocketing provisions following a rise in bad debts. The provision for credit losses is an estimated amount to be lost and is treated as an expense on the company's financial statements.
Non-performing loans (NPLs) jumped 17.89% quarter-over-quarter to 90.03 billion baht, pushing the bank's bad debt ratio up to 3.72% of total lending at the end of March, up from 3.2% at end December, according to the financial statements filed with the SET on May 16, 2016. The bank said that for the three-month period ending March 31, 2016, the provision was 8.62 billion baht, a 131.55% increase compared to the first-quarter 2015.
For 2015, Krung Thai Bank reported a dividend of 0.76 baht per share, a decrease of 15.56% from 2014. The 23 analysts covering the company expect dividends of 0.83 baht per share for the upcoming fiscal year, representing a year-over-year increase of 9.61%. The next earnings announcement is expected on July 21, 2016.
In late May, Krung Thai Bank said it trimmed its minimum lending rate (MLR) by 10 basis points (bps) to 6.525%, and the minimum retail rate (MRR) by 125 bps to 7.875%, in response to the Thailand government policy focused on stimulating the country’s economy. Other big Thai banks, including Bangkok Bank (SET:BBL), Siam Commercial Bank (SET:SCB) and Kasikornbank (SET:KBANK), also made similar cuts.
There could be some headwinds for Thai banks, as the Moody’s ratings agency said the MLR cut will hit the banks' net interest margins (NIMs). A banking analyst with Asia Plus Securities (APS) told Nikkei Asian Review that the cut was a surprise in a negative way, as such cuts will not boost lending because the sentiment is still not good.
ASP slashed its forecasts for bank net profits by 10% for the second-quarter, following the announcements and warned that if the banks are to cut lending rates further, they will also reduce deposit rates, most likely for short-term saving accounts.
From our technical viewpoint, shares of KTB are bouncing along the multi-year trendline support of the ascending channel. The next support level is at 15.20 baht, but the stock could turn bearish quickly if that level can’t hold. According to the Financial Times, the consensus amongst 28 polled investment analysts covering Krung Thai Bank gave the company a Hold rating, with the median 12-month price target of 18.10 baht a share.
Disclosure: No position and no recommendation for any companies mentioned. |
