KTB Shares on the Rise as Loan Loss Provisions May Improve

Witawat (Ed) Wijaranakula, Ph.D.
Thu Jan 12, 2017

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 2.69 trillion baht at the end of third-quarter 2016. 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 October 21, 2016, that its third-quarter 2016 net profit increased 61.25% to 8.62 billion baht, compared to 5.35 billion baht during the same period the previous year. The earnings result exceeded the average 7.5 billion baht forecast of 10 analysts polled by Reuters, helped by a 27% reduction in loan loss provisions after their main debtor, Thailand's biggest steel maker Sahaviriya Steel Industries (SSI), made progress on its debt restructuring. The provision for credit losses is an estimated amount to be lost and is treated as an expense on the company's financial statements. 

According to Reuters, Thailand's Central Bankruptcy Court approved a business plan on December 15 for SSI to restructure debts worth 69.2 billion baht, which will be positive for three SSI major creditors, KTB, Siam Commercial Bank (SET:SCB) and Tisco Bank (SET:TB). Krung Thai's total lending as of September 30 stood at 1.91 trillion baht, down 6% for the year, mainly due to loan repayment by the government, according to the Nikkei Asian Review. The next earnings announcement is scheduled for January 20, 2017. Analysts are expecting a fourth-quarter 2016 EPS of 0.59 baht on revenues of 30.4 billion baht.

For 2015, Krung Thai Bank reported a dividend of 0.76 baht per share, a decrease of 15.56% from 2014. The 22 analysts covering the company expect dividends of 0.85 baht per share for the upcoming fiscal year, representing a year-over-year increase of 11.97%. 

From our technical viewpoint, shares of KTB have been trading in the range between 15.25 baht and 19.10 baht, and may be about to break out. The 14-year trendline support is still intact. A breakout could take the stock up to the 22.00 baht level. According to the Financial Times, the consensus amongst 26 polled investment analysts covering Krung Thai Bank gave the company a Hold rating, with the median 12-month price target of 19.40 baht a share, as of January 9, 2017.

Disclosure: No position and no recommendation for any companies mentioned.


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