1 Third Quarter 2006 Vol.2 No.4 At a glance From CIRO Dear KBank investors and analysts, KBank Interest rates Deposits (%) Effective Date Our third quarter results were in line with expectations, and our nine month year to date Savings 0.75 4 Jul 03 performance was satisfactory. NIM remained well above industry average at 4.10%. Loan growth Fixed-3m 3.50-4.25 1 Aug 06 accelerated to 4.4% year to date, driven by the high growth SME portfolio. Fee income grew by Fixed-6m 3.75-4.50 1 Aug 06 16% YoY due largely to the Channel Expansion project initiated at the beginning of this year. NPLs Fixed-12m 4.00-5.00 1 Aug 06 continued to be closely monitored and managed. Total NPLs dropped to 8.11% in 3Q06. Fixed-24m 4.75 12 Apr 06 For 2006, our loan growth target remains around 6-9%, and will continue to be driven Fixed-36m 4.75 12 Apr 06 by the SME segment in 4Q06 as we further penetrate this untapped and underserved market. Our Lending (%) Effective Date NIM for 2006 will likely be at 3.9-4%, with fee in come growth between 15-20% YoY. Provisioning MLR 7.75 1 Aug 06 expense at the Bank only level will be at Bt1.5bn+ in 4Q06. Operating expenses will increase in MOR 8.00 1 Aug 06 4Q06 due to two major investment projects – Channel Expansion and K-Transformation – bringing MRR 8.25 1 Aug 06 the cost to income ratio for 2006 into the 50-52% range. Max rate MRR+5.00 1 Aug 06 With respect to regulatory updates, we expect no further impact from the assets sold to Note: Interest rates above are for domestic retail customers the Thai Asset Management Corporation (TAMC) since 2000, in which gain/loss sharing is KBank NPL scheduled for 2006 and 2011. We will also sell about Bt4.4bn of NPAs to Bangkok Asset Bank Consol Management (BAM) for which we also expect no financial impact. In exchange, BAM will give us Bt bn % Bt bn % zero-coupon bonds with maturity between 2-9 years. The sales of NPLs to BAM are also under 3Q05 47.9 7.81 59.9 9.65 review and will take place in 2007. As for the IAS39 which will require banks to comply with more 4Q05 44.4 7.08 56.2 8.88 stringent guidelines on provisioning for NPLs, we are now in the process of assessing the impact 1Q06 42.9 6.89 54.8 8.73 and expect no substantial impact under our internal general and specific provisioning regime. 2Q06 42.5 6.70 54.0 8.45 Heading into 2007, we will continue to build quality assets and better capture fee- 3Q06 42.5 6.52 53.3 8.11 based income with continued progress in our strategic investment projects. Our loan growth target is set between 8-13%, fee income growth is expected to be above 20% and the NPL ratio is Industry (14 Thai banks) expected to fall to 5%+. Cost to income ratio will rise next year to 55%+ as investments and HR Sep-06 (Bt bn) Chg(%) upgrades progress. NIM is projected to be within the range of 3.8-3.9%. Bank-only YoY MoM In order to achieve long-term sustainable profitability, we will continue to emphasize Net Loans 4,804 8.67 0.53 brand building with the goal of serving the complete financial needs of our customers within the four Assets 7,482 11.32 0.94 product domains under the KASIKORNBANKGROUP brand. We believe that our focused Deposits 6,064 10.08 1.02 strategies and HR and IT enhancement through the K-Transformation project will help ensure long- Equity 675.0 term competitiveness in the industry. NPL (amt) 463.9 In November we held our annual non-deal roadshow and analyst meeting to give a NPL (%) 8.90 briefing on our 2006 performance and the outlook for 2007. The full version of the presentation LDR (%) 79.22 may be downloaded from www.kasikornbank.com/investor_relations. If you have further queries, Source: Bank of Thailand, KBank please send an email to our mailbox. KBank Price Performance Best regards, Close 25/07/06 Adit Laixuthai, Ph.D. SET Index 732.80 First Senior Vice President & Chief Investor Relations Officer Bank Sector Index 283.57 Corporate Secretariat Division KBANK (L) 71.5 3 Months 17.21 6 Months 8.33 KBank IR Consensus Survey 1 Year 22.22 KBANK (F) 76.0 The Investor Relations Unit has conducted the 3Q06 consensus survey among analysts to 3 Months 21.60 document their opinions, recommendations and earnings estimates for KASIKORNBANK PCL 6 Months 10.14 (KBank), and to get their general views on the Thai banking industry. Both telephone interviews 1 Year 24.59 and research reports provided the sources of information for our consensus survey conducted Oct KBank Mkt. Cap. (Bt bn) 148 2 - 6, 2006. The total number of analysts that currently cover KBank shares is 43 from 41 securities Note: Outstanding shares = 2,382,147,733 as of Oct 17, brokerage companies, both local and foreign. 2006. Source: KBank 3Q06 Earnings Forecasts KBank Price Performance (3Q06) No. of Analyst Mn shares Bt/shr 16 25.0 80 14 20.0 70 12 15.0 10 60 10.0 8 50 5.0 6 - 40 4 1 Jul 06 25 Oct 06 2 Volume (L) Volume (F) KBANK (L) KBANK (F) - 2,700-2,900 2,901-3,100 3,101-3,300 3,301-3,500 3,501-3,700 Source: Bloomberg N=30 Mean = 3,089 Std. Dev. = 205 Note: KBank’s 3Q06 actual profit was Bt3,076mn. 1 2 KBank IR Quarterly Review KBank Financial Summary (Consolidated) 3Q06 Balance Sheet 3Q06 2Q06 QoQ 3Q05 YoY Performance (%) 3Q05 4Q05 1Q06 2Q06 3Q06 (Bt mn) (Bt mn) %Chg (Bt mn) %Chg ROA 1.70 1.27 1.67 1.63 1.40 ROE 19.23 13.83 18.07 17.25 14.69 Cash 14,646 14,372 1.9 13,039 12.3 Interest spread 3.73 3.99 3.96 4.10 3.89 Interbank & Money Market Items 82,356 82,750 (0.5) 84,088 (2.1) NIM 3.79 4.08 4.07 4.26 4.07 Sec under resale agreement 30,560 1,000 2,956.0 9,360 226.5 Cost-to-Income Ratio 50.18 55.72 47.41 49.07 52.04 Investments -net 101,305 81,678 24.0 96,851 4.6 Note: ROA, ROE and NIM are calculated using QoQ averages of total assets, total Loans & AIR 655,981 636,622 3.0 616,205 6.5 shareholders’ equities and total earning assets, respectively, as denominators. Total Reserves 36,263 36,115 0.4 38,449 (5.7) Loans & AIR - net 619,718 600,506 3.2 577,756 7.3 Asset Quality & Properties foreclosed - net 16,769 17,208 (2.6) 17,960 (6.6) CAR (%) 3Q05 4Q05 1Q06 2Q06 3Q06 Premises & equipment 22,087 21,600 2.3 21,388 3.3 Asset Quality (%) Other assets 21,018 25,454 (17.4) 19,480 7.9 Total reserve / Loans 6.2 6.0 5.9 5.7 5.5 Total Assets 908,459 844,568 7.6 839,923 8.2 Total reserve / NPL 64.2 66.6 67.5 66.8 68.0 Deposits 730,209 687,164 6.3 702,378 4.0 CAR (%) Interbank & Money Market items 25,494 22,619 12.7 25,573 (0.3) Tier I 9.58 9.53 9.94 10.47 11.17 Borrowings 47,216 33,543 40.8 20,655 128.6 Tier II 4.93 4.93 5.12 5.03 4.92 Other liabilities 20,495 18,813 8.9 15,251 34.4 CAR 14.51 14.47 15.07 15.51 16.09 Total Liabilities 823,414 762,139 8.0 763,857 7.8 ∗ If 3Q06 net profits were included, the tier-1 and total capital funds would be 11.65%, Fully paid-up share capital 23,819 23,816 0.0 23,725 0.4 16.57% respectively. Premium on share capital 17,900 17,894 0.0 17,724 1.0 Premium on expired warrants Deposit Structure (%) 3Q05 4Q05 1Q06 2Q06 3Q06 Appraisal surplus 9,918 9,953 (0.4) 10,060 (1.4) Current 6.00 5.75 5.82 5.59 5.19 Revaluation surplus on investments 84 (638) 113.1 (207) 140.6 Savings 57.45 56.50 52.38 49.34 44.11 Legal reserve 1,470 1,470 0.0 770 90.9 Term-Less than 6 months 27.52 27.55 28.57 26.55 24.02 Other reserves - - - Term-6 months - 1 year 1.74 2.52 5.70 10.54 16.48 Retained earnings (deficit) 31,853 29,933 6.4 23,683 34.5 Term-1 year - over 1 year 7.29 7.68 7.53 7.98 10.19 Total Shareholders' Equity 85,044 82,428 3.2 76,066 11.8 Total 100 100 100 100 100 Liab & Shareholders' Equity 908,459 844,568 7.6 839,923 8.2 Income Statement 3Q06 2Q06 QoQ 3Q05 YoY AMC Progress (%) 3Q05 4Q05 1Q06 2Q06 3Q06 (Bt mn) (Bt mn) %Chg (Bt mn) %Chg PhethaiAMC (Principal balance: Bt74bn **) Portfolio Resolved (%) 76 ** 79 ** 82 ** 83 ** 85 ** Interest & dividend income 13,144 12,838 2.4 9,412 39.7 Recovery Rate (%) * 52 ** 52 ** 51 ** 51 ** 50 ** Interest expenses 4,632 4,050 14.4 1,740 166.3 * Recovery rate = Present value of future cash flow Net income from interest & dividend 8,513 8,789 (3.1) 7,673 10.9 Principal balance ** In March 2005, Ploy AMC sold the entire asset to the Bank and Phethai AMC.