Maybank rates KBANK “BUY” on positive earnings outlook after setting up asset management JV

Kasikornbank Pcl. (SET: KBANK) and JMT Network Services Pcl. (SET: JMT) have formed Thailand’s first joint venture between a commercial bank and an asset management company (AMC). The cooperation is in line with the Bank of Thailand’s policy to handle rising COVID-related non-performing loans.

Yesterday (June 29), KBANK and JMT held a joint analyst meeting to introduce their new 50-50 asset management joint venture, JK Asset Management (JK AMC). KBANK plans to transfer THB30 billion in NPLs to JK this month and a further THB20 billion in 2H22, bringing the total NPL portfolio of JK AMC to THB50 billion by the end of the year.

The establishment of JK AMC has the objective of operating non-performing asset management business in accordance with the relevant BOT’s laws and regulations, by acquiring non-performing loans including nonperforming assets from the companies under the financial conglomerate of KBANK, other financial institutions and other companies, both secured and unsecured debtors under the terms and conditions of the relevant laws and regulations.


Maybank Securities (Thailand) (MST) maintains a “BUY” rating on KBANK with a target price of THB185.00 per share, highlighting that the asset management joint venture with JMT will clean up the balance sheet.

Problem loans are likely to increase as debt-relief measures expire, but MST expects credit costs to fall YoY in FY22-24E because KBANK has set aside extra expected credit loss (ECL) in recent years. MST anticipates that KBANK will expand its high-yield unsecured loan portfolio in order to boost its revenue, and will speed the settlement of its non-performing loans in order to clean up its balance sheet. KBANK should be the prime beneficiary of economic recovery and rising interest rates.

MST projects KBANK’s 2Q22 net profit of THB10.6 billion (+19% YoY, -6% QoQ). Loans likely grew 5% YoY and 1% QoQ while NIM possibly fell 2bps QoQ to 3.23%, due to a lower loan yield. Given solid loan growth, the broker estimates NII rose 7% YoY. Non-NII likely fell 6% YoY due to lower fees from capital markets business. MST estimated the cost-to-income ratio increased 1ppt YoY to 42.7% in 2Q22 due to higher IT-related expenses. NPL ratio likely rose 9bps QoQ to 4.42% while NPL coverage was likely flat QoQ at 138%. Lastly, MST assumes KBANK booked THB9.9 billion in ECL (160bps credit cost) in 2Q22.