KTB - 4Q24: Beat INVX on ECL

4Q24: Beat INVX on ECL but in line with consensus. KTB reported 4Q24 earnings of Bt10.5bn (-6% QoQ, +71% YoY), 14% above INVX forecast but in line with consensus. The beat was due to lower-than-expected ECL.

Highlights:

• Asset quality: NPLs decreased 3% QoQ (+5% vs. 6% in 3Q24 if write-offs are added back, suggesting stable NPL inflow). Credit cost fell 28 bps QoQ (-98 bps YoY) to 1.02%, well below our expectation. LLR coverage rose to 183% from 179% at 4Q24. We cut our 2025F credit cost assumption by 5% to 1.15% (-3 bps) vs. 1.18% (-26 bps) in 2024.
• Loans: Well above expectations, these grew 5% QoQ and YoY, driven by government loans. Loan growth by segment: corporate +0.6% QoQ, -6.1% YoY; government +25.4% QoQ, +31.1% YoY; SME -1.5% QoQ, -6.6% YoY; and retail +1.6% QoQ, +3.3% YoY. We raise our 2025F loan growth to 3% from 2%.
• NIM: -7 bps QoQ, on a 9 bps QoQ rise in yield on earning assets (due to a cut in lending interest rates) and a 2 bps QoQ slip in cost of funds. We expect NIM to fall 15 bps in 2025, as we forecast a policy rate cut of 75 bps in 2025.
• Non-NII: Below expectations, -18% QoQ (-5% YoY) on lower gains on financial instruments and investment and other income. Net fee income rose 3% QoQ (+7% YoY). We forecast non-NII to rise 2% in 2025 vs. +11% in 2024.
• Cost to income ratio: +183 bps QoQ (+566 bps YoY) to 44.69% on seasonality.

Raised 2025 earnings. We raise our 2025F by 4%, adjusting credit cost and loan growth assumptions, leading to a forecast growth in 2025 of 2%, with 3% loan growth, a 15 bps drop in NIM, a 3 bps reduction in credit cost, 2% growth in non-NII and a rise in cost to income ratio.

Maintain Neural with TP hike. We maintain Neutral on KTB with a hike in TP to Bt24 (based on 0.7x 2025F PBV) from Bt22.

Key risks: 1) Asset quality risk from an uneven economic recovery,
2) slower loan growth on low demand and high competition and 3) ESG risk from market conduct and cyber security.