KASIKORNBANK PCL

The negative outlook on KBank reflects increasing asset-quality pressures on Thai banks amid COVID-19. This is a negative view of the Thai banking sector, rather than of KBank specifically. We now see a one-in-three possibility that economic risks for the Thai banking system will increase. This could occur if already-high corporate and household leverage spikes further, worsening imbalances in the system. Risks could also occur if the banking system's asset quality and financial performance deteriorate beyond our current expectations. We could downgrade KBank over the next 12-18 months if economic risks facing Thai banks increase significantly beyond our current expectations. We can also downgrade KBank if its asset quality deteriorates materially beyond our expectations, such that the gap between the

...KASIKORNBANK PCL (KBank) has adequate capital and strong liquidity to buffer COVID-19 headwinds. We assume that elevated credit costs due to a recent resurgence of COVID-19 will strain the bank's profitability. KBank's regulatory capital ratios, however, are comparable to large peers' and comfortably above regulatory minimums. The bank's risk-adjusted capital ratio is likely to remain adequate at about 8% over the next two years. Its widespread domestic branch networks and established franchise have also enabled it to tap stable retail deposits with manageable funding costs. Low-cost current and savings account deposits contributed 81% to total deposits as of September 2021. This was one of the highest in the industry. Credit stress is likely to remain elevated for the next one to two years. A deterioration in reported asset quality has been manageable so far. This is supported by multiple rounds of regulatory forbearance and moratorium programs. KBank's NPL ratio is stable, at around 3.85%...

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