Kasikornbank hits excellent NIM in 2Q14

The bank also beat forecast 2Q14 earnings.

Kasikornbank's gross loans grew 1.5% QoQ and 2.3% YTD, while net interest income grew 6% QoQ, thanks to the strong NIM of 3.75% (+14bps QoQ).

According to a research note from Maybank Kim Eng, meanwhile, 2Q14 earnings grew 7 percent YoY and 2 percent QoQ to THB11.7b, beating the Maybank Kim Eng's forecast by 5 percent, thanks to the stronger than expected NIM.

Further, funding costs dropped by 23bps QoQ due to the maturity of high-rate deposits.

Non-interest income was flat QoQ as the bank could gain higher fees from the capital markets to offset the weak trading and forex income.

On the cost side, OPEX grew 14% QoQ (vs our 8% forecast) due to the seasonal increase in marketing expenses, while cost to income jumped to 44% vs 40% in 1Q14.

Here's more from Maybank Kim Eng:

Although we expect funding costs to increase from the higher deposit competition in 2H14, we revised up NIM to 3.60% from 3.53% after we lower deposit cost by 9bps to 1.85% to reflect the strong NIM of 3.68% and low funding cost of 1.75% in 1H14.

We keep 15% non-interest income growth as we think the bank could generate strong fee income from both bancassurance and credit card fees.

Following our assumption fine-tuning, we expect earnings to grow 14% this year and 10% next.

We like KBANK due to its well-balanced loan portfolio/revenue structure and high NIM.

Key risks are a rising credit cost and OPEX.