3QFY17 profit far short of forecast at Bt5.9bn, down 31.9% y‐y but up 82.2% q‐q: KTB posted a big earnings miss for 3QFY17, hit by higher‐than‐expected loan‐loss provisions. In this period, the quarterly profit came in at Bt5.9bn, down 31.9% y‐y on account of faltering interest income buffeted by loan contraction and interest rate cuts, lower FX income and mounting loan‐loss provisions. On the other hand, the q‐q comparison showed a strong growth of up to 82.2% as loan‐loss provisions were lower than the levels seen in 2QFY17 when the bank took huge loan‐loss provisions to cover EARTH’s debt though the bank continued to set aside extra provisions in this period.
3QFY17 loans down sharply while NPLs still on the rise: In 3QFY17, the bank reported its loan book contracted as much as 2.1% q‐q, swinging its YTD loan portfolio back to contraction territory, down 1.6% from end‐FY16. On the other hand, NPLs remained on the increase, up from 4.3% in the prior quarter to 4.5% in this period.
FY17‐FY18 profit downgrades, target price cut to Bt19.40/share but ‘ACCUMULATE’ rating unchanged: We pencil down our FY17‐FY18 profit forecasts for the bank to Bt24bn and Bt30bn respectively to reflect expectations that loan‐loss provisions will stay high in the face of a steady rise in NPLs and the efforts to boost reserve coverage to meet new rules. Following the above profit cuts, we tweak down our FY18 target price for the bank to Bt19.40/share but our ‘ACCUMULATE’ rating remains unchanged as the new target still offers some but little upside from current trading levels.