Global Bank Equity Specialist, Creative Portfolios

Paul Hollingworth

Global Bank Equity Specialist

Creative Portfolios

Equity Bottom-Up

<a href="https://www.smartkarma.com/entities/kiatnakin-bank-pcl" target="_blank" rel="noopener" data-smartkarma-citation="entities:299:1">Kiatnakin Bank (KKP TB)</a> may be falling behind its targets for profitability, credit costs, and loan growth but we are more concerned about eroding fundamental trends and still elevated risky credit growth based on non-CASA funding within a strained household debt backdrop.We covered the stresses in household debt and Baht overvaluation recently in <a href="https://www.smartkarma.com/insights/thanachart-and-tmb-on-the-defensive-an-insurance-policy-for-challenging-times" target="_blank" rel="noopener" data-smartkarma-citation="insights:30980">Thanachart and TMB: On the Defensive. An Insurance Policy for Challenging Times</a>. The bank stands on a PH Score of 3.8 which is subpar by global and Thai standards. Our fundamental momentum gauge incorporates trends in Profitability, Efficiency, Capitalisation, Liquidity, Provisioning, and Asset Quality. The Score is well below other lenders in Thailand such as <a href="https://www.smartkarma.com/entities/bank-of-ayudhya-pcl" target="_blank" rel="noopener" data-smartkarma-citation="entities:136:1">Bank Of Ayudhya (BAY TB)</a> and <a href="https://www.smartkarma.com/entities/bangkok-bank-public-co-ltd" target="_blank" rel="noopener" data-smartkarma-citation="entities:213:1">Bangkok Bank Public (BBL TB)</a> in particular but also even uninspiring scores at <a href="https://www.smartkarma.com/entities/kasikornbank-pcl" target="_blank" rel="noopener" data-smartkarma-citation="entities:293:1">Kasikornbank PCL (KBANK TB)</a> , <a href="https://www.smartkarma.com/entities/siam-commercial-bank-pub-co" target="_blank" rel="noopener" data-smartkarma-citation="entities:214:1">Siam Commercial Bank Pub Co (SCB TB)</a> and <a href="https://www.smartkarma.com/entities/thanachart-capital-pcl" target="_blank" rel="noopener" data-smartkarma-citation="entities:297:1">Thanachart Capital (TCAP TB)</a>. We would be underweight the sector.In <a href="https://www.smartkarma.com/insights/kiatnakin-bank-metamorphosis" target="_blank" rel="noopener" data-smartkarma-citation="insights:29778">Kiatnakin Bank: Metamorphosis</a>, we noted the bank aggressively striving to move away from core auto HP towards growth "opportunities" in corporate and real estate lending. Q219 results underline this trend and reinforce the erosion of fundamental trends.Trading on a P/Book of 1.46x and a Franchise Value of 35%, shares of Kiatnakin remains vulnerable given growth in risky consumer (excluding core HP) and commercial (especially real estate and tourism related) segments as well as a newly-found drive in corporate credit.

Kiatnakin Bank (KKP TB) may be falling behind its targets for profitability, credit costs, and loan growth but we are more concerned about eroding fundamental trends and still elevated risky credit growth based on non-CASA funding within a strained household debt backdrop.We covered the stresses in household debt and Baht overvaluation recently in Thanachart and TMB: On the Defensive. An Insurance Policy for Challenging Times. The bank stands on a PH Score of 3.8 which is subpar by global and Thai standards. Our fundamental momentum gauge incorporates trends in Profitability, Efficiency, Capitalisation, Liquidity, Provisioning, and Asset Quality. The Score is well below other lenders in Thailand such as Bank Of Ayudhya (BAY TB) and Bangkok Bank Public (BBL TB) in particular but also even uninspiring scores at Kasikornbank PCL (KBANK TB) , Siam Commercial Bank Pub Co (SCB TB) and Thanachart Capital (TCAP TB). We would be underweight the sector.In Kiatnakin Bank: Metamorphosis, we noted the bank aggressively striving to move away from core auto HP towards growth "opportunities" in corporate and real estate lending. Q219 results underline this trend and reinforce the erosion of fundamental trends.Trading on a P/Book of 1.46x and a Franchise Value of 35%, shares of Kiatnakin remains vulnerable given growth in risky consumer (excluding core HP) and commercial (especially real estate and tourism related) segments as well as a newly-found drive in corporate credit.

Kiatnakin: Downward Trends Reinforce Our Cautious Stance