KBANK net profit up 7% in Q3, but low dividends raise concerns: analysts

A substantial growth in net income helped drive up profits for the quarter.

Kasikornbank (KBANK) has seen a 7% increase in its net profit in Q3, but with slower loan growth and with credit costs remaining high.

A substantial growth in net income helped drive up profits, although this was counterbalanced by weaker-than-expected investment returns, noted UOB Kay Hian analyst Kwanchai Atiphophai and assistant analyst Thanawat Thangchadakorn.

“Asset quality improved due to a clean-up programme, although high credit costs are expected to persist,” the analysts wrote in their latest commentary on the bank.

Excluding the provision expenses, KBANK's pre-provision operating profit (PPOP) grew 16% year-on-year, though it remained flat compared to the previous quarter. 

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Low dividends
The ‘low’ dividend payout also raises concerns over KBANK’s stock valuation.

“KBANK falls behind its industry peers in terms of the dividend payout ratio, offering the lowest rate among its counterparts. In 2023, KBANK's dividend payout ratio was a mere 28.8%,” Atiphophai and Thangchadakorn reported.

“During the recent analyst meeting, management was questioned about this low dividend payout, but their response lacked clarity on whether KBANK intends to increase it in the future,” the analysts added.

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They further warned that the issue could negatively impact the bank's performance and valuation, undermining its Return on Equity (ROE). 

KBANK's reluctance or inability to raise the dividend payout ratio may cast doubt on its future valuation prospects,” Atiphophai and Thangchadakorn said.