In line with estimates, 3Q24 reflected: 1) QoQ lower NPLs and credit cost, 2) mute loan growth, 3) better NIM, 4) QoQ stable non-NII and 5) rising cost to income ratio. Earnings are expected to be essentially flat QoQ but higher YoY in 4Q24. We maintain Underperform with an unchanged TP of Bt39, seeing valuation as expensive and growth outlook weak.
Research
KTC – 3Q24: In line with estimates
3Q24: In line. KTC reported 3Q24 earnings of Bt1.92bn (+5% QoQ, +3% YoY), in line with INVX and consensus forecasts.
Highlights.
1) Asset quality: NPL ratio slipped 4 bps QoQ. Credit cost decreased 32 bps QoQ to 6.11%. LLR coverage rose to 373% from 363% at 2Q24.
2) Loan growth: mute both QoQ and YoY and -5% YTD
3) NIM: NIM rose 19 bps QoQ (-30 bps YoY). Yield on loans rose 21 bps QoQ (-28 bps YoY). Cost of funds slipped 1 bps QoQ (+25 bps YoY).
4) Non-NII: Non-NII inched up 1% QoQ (+19% YoY).
5) Cost to income ratio: +92 bps QoQ (+85 bps YoY). Opex rose 4% QoQ (+9% YoY).
4Q24 and 2025 earnings outlook. 9M24 earnings accounted for 74% of our full-year forecast (+2%). We expect 4Q24F to be flattish QoQ (better toplines to be offset by higher opex) but grow YoY (higher non-NII). We expect 2025F earnings to grow 3%, with 3% loan growth, lower NIM (from a government program of cash back of 0.5% interest on credit card loans in 1H25 and 0.25% in 2H25), a slight ease in credit cost and better non-NII.
Maintain Underperform with an unchanged TP of Bt39 (based on 2.2x 2025F PBV): valuation is expensive and earnings growth outlook is poor.
Key risks: 1) Asset quality risk from an uneven economic recovery, 2) a step up in credit card minimum payment from 8% to 10%, 3) the BoT’s household debt measures and 4) ESG risk from market conduct.