Thai bank earnings to fall 7% in Q1: analyst

Non-interest income which may have dropped 8% hit profits.

Banks in Thailand are not expected to open the financial year on strong footing as earnings are tipped to fall 7% YoY in Q1 amidst weak non-interest income and steeper provisions weighing in on profitability, according to UOB Kay Hian. 

Amongst big-sized banks, TISCO is forecasted to report the best earnings growth at 5% yoy, supported by lower provisions whilst Bangkok Bank (BBL) earnings are tipped to rise by a decent 2%.

On the other end, Siam Commercial Bank (SCB) is forecasted to report the weakest earnings growth, down 21% YoY amidst higher provisions, followed by Thanachart Capital (TCAP) whose earnings are expected to fall 14% and Kasikornbank’s profits (-8%) which is likely to have been impacted by a weaker non-II.

“The only weak area was non-II as fee income was dragged by the waiving of digital banking fees whilst capital market-related fees and insurance premium income should have remained soft. Overall, we forecast non-II of banks to have dropped by 8% yoy,” analyst Thananchai Jittanoon said in a report.

Also read: Thai banks brace for blow from tighter mortgage curbs

Net interest margin (NIM), a common measure of profitability, may have also already peaked for the banking sector with the headline figure expected to hover at around 3.3% Q1.

On a quarter-on-quarter basis, however, net profit is tipped to have grown 17% as net interest income drives earnings forward. Moreover, operating expenses is forecasted to have dropped which should bring down the cost-to-income ratio to around 46% in Q1 from 50% in the previous quarter.

Here’s more from UOB Kay Hian: 

With the continued economic recovery, loan growth should continue to recover. We expect top-line growth to continue to steadily expand, offsetting the weakness in non-interest income (non-II). Against the backdrop of stable asset quality, provisions should remain on a downward trend, while earnings are forecasted to continue to recover. 

Loan growth continues to recover. We expect loans growth to continue to gain better traction from last year, with yoy loan growth now above 5%. A key growth driver was retail lending (HP and housing loans). We expect loans to steadily grow by over 6% yoy this year.

Asset quality to have remained under control. We expect NPL levels to have remained relatively stable across most banks. Thus, the sector’s credit costs are likely to have remained normal at around 150-155bp.