KTB (BUY : Fair Price : Bt23.00) : Solid performance in 3Q23

20 October 2023
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Maintain BUY with a fair price of Bt23.00. We like its healthy balance sheet, steady net profit growth, ROE expansion, and compelling valuation. KTB’s net profit in 3Q23 came in line with expectations at Bt10.3bn in 3Q23 (+21.7% YoY, +1.2% QoQ). Despite potential benefits from the recent interest rate hike, we prudently maintain our net profit growth of 16.7% in 2023 because of the escalation of geopolitical conflicts that might weaken the economic recovery ahead. We believe that the recent decline in share price should moderately price in the uncertainty, and it is an opportunity for long-term investment as the stock trades at 0.6x PBV’24E, -0.75SD below its ten-year average.

Solid 3Q23 performance

• KTB’s 3Q23 net profit came in at Bt10.3bn, up 21.7% YoY (+1.2% QoQ). The YoY and QoQ rises were underpinned by higher net interest income (NII) from loan growth, a higher NIM of 3.4% (3Q22: 2.7%), and higher non-interest income.

• 9M23 net profit was Bt30.5bn, up 19.2% YoY due to higher NII and higher other income.

• Loans turned into a growth of 2% QoQ in 3Q23 (2Q23: -0.2%), given higher demand from corporate, government, and consumer loans, which resulted in a rise of 1.4% YTD for 9M23.

• Asset quality was stable. The NPL ratio was stable QoQ at 3.2%, while the coverage was higher at 180.4%.

Potential upside from interest rate hikes

• Although we believe that KTB’s fundamental remains strong enough to withstand the uncertainty, the uncertainty about geopolitical conflicts might weaken the economic recovery ahead and potentially erode loan quality. We maintain our net profit growth projection of 16.7% in 2023. We expect the growth to slow to 12.3% in 2024, primarily supported by higher net interest and non-interest income.

• For 4Q23, we expect net profit to rise 11% YoY on higher NII, but net profit would likely decline by 13% QoQ given high operating expenses.

• The bank’s ROE is rising to 10.1%/10.5% in 2023-24 and will become the highest ROE among large banks.

**Maintain BUY with a fair price of Bt23.00 **

Our valuation is derived from the GGM model (ROE 10.4%, growth 2%). Our fair price implies a 0.74x PBV’24E.