KGI Securities noted that Krung Thai Bank Public Company Limited (SET: KTB) has notified the Stock Exchange of Thailand (SET) about its financial targets for 2025, revealing figures that may suggest potential downside risks to earnings projections compared to both market consensus and analyst forecasts.
The bank anticipates stagnant loan growth and expects its net interest margin (NIM) to decrease to between 2.9% and 3.2%, down from 3.35% in 2024. This contrasts with KGI’s expectation of 3.17%.
KTB has set its credit cost guidance for 2025 at 105-125 basis points, higher than last year’s 118 basis points and exceeding the 100 basis points forecasted by the analyst. The bank indicated that such figures are normal, aligning with its 2024 expectations, though they suggest significant earnings volatility in 2025.
Notably, KTB is well-positioned to maintain low credit costs due to its significant focus on low-risk loans. The bank’s loan portfolio includes about 20% in government-related loans, and 40% directed at consumer loans for government and state-owned enterprise employees, with repayments linked to monthly payrolls. This strategic allocation helps KTB manage risk effectively, keeping credit costs down.
Additionally, improvements in loan quality, as evidenced by declines in riskier loan categories over the past two years, should help the bank manage asset quality risks effectively.
For the current earnings forecast, KGI expects KTB to record a 1% quarter-over-quarter decline in loan growth, with an anticipated 3% increase year-over-year. The NIM is expected to decrease by 10 basis points on a quarterly basis, settling at 3.2%. Meanwhile, credit costs are predicted to rise to 110 basis points, marking a 20 basis point increase quarter-over-quarter and a 12 basis point decrease year-over-year. This reflects a modest 3% quarterly increase in non-performing loans (NPL).
Quarterly earnings growth is anticipated to be driven by increased gains from fair value through profit or loss (FVTPL) on fixed income investments, which should more than compensate for reduced net interest income (NII) and higher credit costs.
Meanwhile, year-over-year growth is expected to be modest, reflecting lower operating expenses and credit costs. Earnings for the first quarter of 2025 are projected to account for approximately 25% of KGI’s full-year forecast.
Following these developments, projections for KTB remain positive, with the analyst maintaining a loan growth forecast of 5% year-on-year for both 2025 and 2026, attributed to the potential for a significant increase in government-related loan drawdowns. Additionally, NIM is projected to be at 3.17% in 2025 and 3.15% in 2026, while credit costs are expected to stabilize at 100 basis points for both years.
Although KTB’s own targets for loan growth and NIM fall short of KGI’s forecasts, the analyst believes the bank’s credit costs will remain manageable, supported by a diverse loan mix and gains from FVTPL. As a result, KGI Securities upholds an ‘Outperform’ rating for KTB, with a 2025 target price set at 26.25 baht per share, based on a price-to-book value of 0.8 times.
