Krung Thai Bank's operating profit surges 22% in 2Q14

Strong NII contributed to the development.

Thanks to strong NII and non-interest income Thailand-based Krung Thai Bank's PPoP rose 22 percent QoQ, as part of its 2Q14 highlights.

According to a research note from Maybank Kim Eng, the bank's gross loans also grew 2.5% QoQ and 5.8% YTD, while net interest income rose 4% QoQ thanks to strong NIM of 2.90% (+12bps QoQ).

LDR increased sharply to 97% from 90% after the bank lowered its deposit base. Non-interest income and OPEX grew 2% QoQ, in line with our forecasts.

The bank has set aside provisions of THB5.4b vs THB1.8b in 1Q14 while its NPL ratio fell 9bps YoY to 3.43%.

Here's more from Maybank Kim Eng:

Loan loss coverage ratio improved significantly to 113% from 102% in 1Q14. 1H14 earnings accounted for 47% of our FY14 forecast. We maintain our 7% loan growth target and see more upside risk on loan growth this year (+5.8% YTD–Jun14).

Non-interest income should grow in line with loan growth in 2H14. NIMs are expected to drop in 2H14 due to the high LDR which requires the bank to increase its deposit base.

We see the extra provisions as a positive development to strengthen its coverage ratio and catch up with the sector average of 135% in 2Q14.