Kiatnakin Phatra Securities (KKPS) notes a robust first quarter for Krung Thai Bank Public Company Limited (SET: KTB), highlighting a better-than-expected financial performance to start 2026.
KTB recorded a net profit of THB 12.4 billion for the first quarter, marking a 6% year-on-year and 15% quarter-on-quarter increase, significantly surpassing both KKPS’ and consensus estimates, which ranged between THB 10.2-11 billion.
The positive surprise was attributed primarily to higher investment income and stronger recoveries from non-performing loans (NPLs) and non-performing assets (NPAs). Additionally, increased dividend income helped reduce the effective tax rate to 18%, compared to 21.5% in the same period last year. Credit costs landed near the higher end of guidance, with a solid loan-loss reserve (LLR) coverage at 201%.
Non-interest income (non-NII) showed particular strength, rising 30% year-on-year and 27% quarter-on-quarter to reach THB 14.9 billion. This performance came despite earlier concerns regarding potential bond market volatility. Fee income advanced by 14%, benefitting in part from early recognition ahead of the recent market fluctuations.
Fair Value Through Profit and Loss (FVTPL) gains surged 90% year-on-year and 82% quarter-on-quarter, bolstered by foreign exchange (FX) income and mark-to-market (MTM) gains related to the Vayu1 fund and KTB’s 25% stake in Thai Airways International (THAI) after the expiry of a share lock-up period.
In terms of asset quality and lending activity, loan growth was healthy at 2.4% quarter-on-quarter, mainly driven by government loan drawdowns. However, the net interest margin (NIM) declined by 21 basis points compared to the previous quarter, reflecting a greater proportion of lower-yielding government loans and the impact of recent interest rate reductions.
Asset quality improved, as the proportion of Stage 2 loans fell by 2% quarter-on-quarter and the NPL ratio decreased to 3.35%, down from 3.4% at the end of the previous quarter. Provisioning increased by 10% quarter-on-quarter in a prudent move, resulting in credit costs of 1.1%, which falls within KTB’s full-year guidance of 0.75-1.15%.
Given these strong quarterly results, KKPS has revised its earnings forecasts upward, increasing 2026 projections by 7% and 2027-28 estimates by 4-5%, chiefly due to higher assumptions for non-NII growth through FVTPL gains, FX income, and recoveries.
KKPS maintains a ‘Buy’ rating on KTB, with the target price raised to THB 39.00 per share from THB 38.00, citing the bank’s diversified income streams, strong balance sheet anchored by a robust Common Equity Tier 1 (CET1) capital buffer, and the potential for more proactive capital management to support future performance.
