Kasikornbank's earnings dropped 16% to THB7.7b in 4Q12

But overall profit for FY12 grew 46%.

According to Maybank Kim Eng, KBANK announced 4Q12 earnings at THB7.7b, down 16% QoQ, due mainly to rising expenses. This was in line with our and consensus estimates. Overall, FY12 net profit grew 46% and we expect FY13F earnings to expand 16%.

Here's more from Maybank Kim Eng:

KBANK has been the best performer among Thai bank stocks in 2012; we believe this news and its sharp ROE expansion is already priced in. For this year, we expect ROEs to be flat at 21%. Its current valuation of 2.2xPBV (+2S.D. to its mean) now looks demanding. We rate KBANK a HOLD with a target price of THB200.

4Q12 earnings drop as expected. KBANK reported in-line 4Q12 net profit of THB7.7b, down 16% QoQ on rising Opex, but still up 154% YoY owing to additional tax expenses in 4Q11. Loans expanded 3.1% QoQ (+9.6% in 2012), driven by the retail and SME segments, while NIM was flat at 3.53%.

Net interest income rose 5% QoQ and 14% YoY. Fee income growth was solid at 8% QoQ and 38% YoY from rising business transactions during the year-end. However, non-NII dropped 2% QoQ on lower insurance premiums.

Opex surged 19% QoQ on seasonal effects and K-Transformation expenses, bringing the cost-to-income ratio up to 50% in 4Q12 from 44% in 3Q12. Provisioning rose 31% QoQ to THB2.6b, following rising NPLs (mostly from NPL reclassifications). Overall, FY12 net profit was THB35.3b, up 46% YoY.

Expect slowing earnings growth momentum and flat ROEs. For FY13F, KBANK has set a loan growth target of 9-11% with the SME and retail segments remaining the key drivers. KBANK will continue to focus on non-NII and is targeting growth in the mid-teens, supported by fee income and insurance premiums.

NIMs are projected to stay at 3.4-3.6% (based on a policy rate of 2.50%). Provisioning is expected at THB2b/quarter, with an NPL target of under 2.4%. The cost-to-income ratio will likely fall slightly to 45-46%. These targets are fairly in line with our and consensus projections.

We forecast FY13 earnings growth of 16%, vs. the sector average of 29% (our FY13-14F forecasts are in line with consensus estimates). We do not expect further ROE expansion in FY13F after an outstanding rise from 16.7% in 2011 to 20.8% in 2012.