Krungsri's non-performing loans predicted to grow 5bps to 2.6%

The annualized credit cost is likely to be reduced in Q3.

According to Maybank Kim Eng, Krungsri's management guided that there should be no surprises in the upcoming 3Q results. Thanks to lower credit cost, net profit should improve from the previous quarter.

Here's more from Maybank Kim Eng:

We believe loans may contract slightly but better net interest margin will boost net interest income by 1%. Non-interest income growth will remain firm and we expect it to be 3%. 

Operating expenses are likely to increase. However, NPLs are projected to grow by only 5bps to 2.6%, based on our calculation.

Therefore, BAY is likely to reduce the annualized credit cost this quarter to 160bps, down from 168bps earlier. With lower provisions and better income, we expect net profit to increase by 7%.

We reiterate that being a member of MUFG, BAY has huge potential to achieve something bigger. However, we believe it will take some time for it to review and adjust its balance sheet and strategies to capitalize on this relationship.

We consider this year and the next to be a transition period. Therefore, we do not expect the ROE will be very impressive.