Global Bank Equity Specialist, Creative Portfolios

Paul Hollingworth

Global Bank Equity Specialist

Creative Portfolios

Equity Bottom-Up

We are somewhat cautious about the leveraged state of the Thai consumer as elsewhere (Malaysia, South Korea, Scandinavia etc).<a href="https://www.smartkarma.com/entities/299" target="_blank" data-smartkarma-citation="entities:299:1">Kiatnakin Bank (KKP TB)</a> is heavily exposed to the aforementioned risks despite its concerted pivot towards non-consumer finance segments. In striving to reduce risk in its main business, HP, the bank is forcefully expanding its credit supply to mortgages, the corporate sector, and to real estate - in many ways away from its core specialisation. While half the (traditional consumer) loan book is stagnant, the other half shows gung-ho characteristics which may not be appropriate. This heated growth though is funded more by Deposits rather than Debt as in the recent past.Metrics are eroding. Our PH Score™ reveals a deterioration in Profitability, Margin, Efficiency, Capitalisation, and Provisioning while headline Asset Quality (despite "substandard" bucket) and Liquidity have improved. With a score of 3.9, this places Kiatnakin in the bottom quartile of banks globally.Shares do not reflect the risks, trading on a rich Franchise Valuation of 30% and a P/Book of 1.3x.

We are somewhat cautious about the leveraged state of the Thai consumer as elsewhere (Malaysia, South Korea, Scandinavia etc).Kiatnakin Bank (KKP TB) is heavily exposed to the aforementioned risks despite its concerted pivot towards non-consumer finance segments. In striving to reduce risk in its main business, HP, the bank is forcefully expanding its credit supply to mortgages, the corporate sector, and to real estate - in many ways away from its core specialisation. While half the (traditional consumer) loan book is stagnant, the other half shows gung-ho characteristics which may not be appropriate. This heated growth though is funded more by Deposits rather than Debt as in the recent past.Metrics are eroding. Our PH Score™ reveals a deterioration in Profitability, Margin, Efficiency, Capitalisation, and Provisioning while headline Asset Quality (despite "substandard" bucket) and Liquidity have improved. With a score of 3.9, this places Kiatnakin in the bottom quartile of banks globally.Shares do not reflect the risks, trading on a rich Franchise Valuation of 30% and a P/Book of 1.3x.

Kiatnakin Bank

Kiatnakin Bank: Metamorphosis