Kiatnakin Bank net interest income swells 11% QoQ in 3Q14

This quarter's earnings beat forecasts.

Thailand-based Kiatnakin Bank's 3Q14 earnings trumped projections as its net interest income grew 11% QoQ, beating Maybank Kim Eng's forecast due to better NIM of 3.87% vs 3.45% in 2Q14.

According to a research note from Maybank Kim Eng, this was driven by higher asset yield, on the reversal of interest income from NPL reclassification, and lower funding cost.

Meanwhile, loan demand remained weak across the board led by retail lending (-4.6% YTD).

Non-NII increased 10% YoY and 91% QoQ on better capital market related fees and higher gain on NPA sales of THB219m vs THB58m in 2Q14 and THB139m in 3Q13.

Here’s more from Maybank Kim Eng:

Asset quality was stable with lower NPLs of 3% QoQ from repayment of real estate loan.

KKP had set total credit cost of THB1.2b (provisions of THB570m and loss on sales of repossessed cars of THB618m), vs THB824m in 2Q14.

Coverage ratio increased to 71% from 69% in 2Q14. 9M14 PPoP accounted for 68% of our full-year forecast.

Maintain HOLD; Prefer TISCO. We believe asset quality should gradually improve in 4Q14 with lower NPL inflow and loss on sales of repossessed cars.

However, we assume 1.2% credit cost in 2015-16F vs 1.25% this year as we believe the bank needs to build up loan loss reserves.

This would put pressure on the bank’s earnings and ROE. Note that coverage ratio was 100% in 2013.