Thailand-based Kiatnakin Bank aims for 6% loan growth in 2015

Following -3% growth in 2014.

The management of Thailand-based Kiatnakin Bank said that it is targeting 6 percent loan growth for 2015 from -3 percent for 2014.

According to a research note from Maybank Kim Eng, key growth drivers will come from corporates (targeted to grow three times to THB20b) and SMEs (+8%) from real estate and car dealership (floor plan) with flat HP loan.

Further, the bank plans to add project finance loans from listed property developers to improve credit quality as all real estate loans from non-listed companies are relatively high risk.

Here's more from Maybank Kim Eng:

Solid NIM on declining funding cost. KKP’s NIM improved to 3.9% from 3.7% in 2013 due to its expiration of high deposit rate, tighter LDR and higher proportion of low cost CASA ratio (34% in 2014 from 17% in 2013). Its funding cost fell by 40bps to 3.4% in 4Q14.

Better outlook on asset quality. KKP expects lower credit cost this year after it set aside THB900m of general provision in 4Q14.

The bank currently sells 1.4k units of repossessed cars per month vs the peak level of 2k units in 1H14. We expect lower credit cost of 140bps in 2015 from 171bps in 2014.

We conservatively forecast 3.5% loan growth in 2015 due to negative HP loan growth of -5%. Base on HP loans’ average duration of three years, we believe KKP needs to grow HP loans at least 30% to offset the 30-35% loan repayment this year.

We cut FY15F earnings by 7% after we lower fee income growth to 5.5% (from 10%) and increase credit cost by 10bps to 140bps.