KASIKORNBANK PCL

Our stable outlook on KBank reflects the bank's strong market position as one of the largest banks in Thailand, its good capitalization, stable deposit base, and the likelihood of government support. The ratings on KBank already factor in some deterioration in the bank's asset quality over the next 12-24 months. We could downgrade KBank in the next 12-24 months if we believe credit conditions facing banks operating in Thailand will deteriorate significantly beyond our current expectations, causing weak loans and credit costs to materially exceed our current forecasts. We could upgrade KBank if we considered asset quality risk to have improved materially for Thai banks. This improvement could happen when we believe there is a materially reduced risk of restructured

...KASIKORNBANK PCL's (KBank) 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. We forecast nonperforming loans (NPLs) will continue to rise only gradually in the next 12-24 months, partly due to relief measures provided by the Bank of Thailand central bank. KBank's credit costs will decline to 1.3%-1.6% during this period, lower than 1.7% in 2021. KBank will remain focused on asset-quality preservation amid tough operating conditions. About 6.3% of KBank's loan book as of September 30, 2022 has been restructured. This is slightly better than peers, and significantly lower than the peak point of the bank's loans under relief, which was 40% in 2020. In our view, KBank's underwriting standards are prudent and the bank has adequate risk-management mechanisms. The bank has been able to mitigate inherently higher-risk small and midsize enterprise(SME) loans with superior client selection and risk management....

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