Most banks to post lower Q3 profit
The profit margins of banks in the third quarter are likely to come under pressure from higher provisions for small and medium-sized enterprises and their measures to assist those customers.
The combined net profits of eight commercial banks in the third quarter will be reported at BT39.76 billion, a drop of 15 per cent from the second quarter and 21 per cent year on year, according to KGI Securities (Thailand).
Bank of Ayudhya’s growth in fiscal 2015 was largely driven by the one-time transfer of the corporate loan portfolio from the Bangkok branch of the Bank of Tokyo-Mitsubishi UFJ (BTMU), so BAY was excluded from KGI’s analysis.
The surge in special-mention loans – those that are overdue for one to three months – especially among SMEs forced banks to help their customers. They cut interest rates and waived principal payments, which eroded their margins.
KGI expects the net interest margin (NIM) of the banking industry to shrink by 15-20 basis points quarter on quarter, which is greater than the reduction in interest rates in the first half.
Beside the increase of new SME non-performing loans, which raised credit costs, the huge provisioning for Sahaviriya Steel Industries (SSI) has weighed heavily on net profits.
The three main local lenders to SSI will report the biggest plunge in net profit. Krungthai Bank (KTB) is expected to take the hardest hit in the third quarter from SSI, with net profit diving 40.5 per cent to Bt5.5 billion from Bt9.25 billion in the same quarter last year.
KTB will be followed by Tisco Financial Group, the holding company for Tisco Bank, with net profit falling 34.5 per cent to Bt713 million from Bt1.09 billion, and Siam Commercial Bank, with net profit slipping 18.7 per cent to Bt10.77 billion from Bt13.25 billion, the securities house said.
Even though Kasikornbank has no direct exposure to SSI, as the biggest SME lender, its profit in the third quarter is expected to droop by 17.5 per cent to Bt10.32 billion year on year. Its lower restructured loan yield will eat into its NIM in the period, while the uptrend in SME NPLs will continue to trigger loan loss provisions.
Thanachart Capital (TCAP), the holding company of Thanachart Bank, is the only player in commercial banking that will report net profit growth in the third quarter – from Bt1.2 billion in the same quarter last year to Bt1.32 billion. But compared with the second quarter, its net profit will still dribble down by 5.3 per cent from Bt1.39 billion.
TMB Bank enjoyed loan growth of 7 per cent in the first eight months, better than its peers, which posted only 1 per cent. However, most of that expansion was from restructuring loans to SMEs that were suffering liquidity shortages.
The financial programme has squeezed TMB’s NIM and net interest income, while provisions remain on the high side, so its third-quarter net profit is projected to tumble 7.5 per cent year on year to Bt2.2 billion.
