RETAIL BANKING | Tony Chua, Thailand

Thai banks' fourth quarter profit seen to decline

Bad loans, higher costs, and lower demand seen to hit lenders’ results.

The momentum of bank earnings in the current quarter is expected to decline from the third quarter because of reduced ability across customer segments to make debt payments, at the same time banks face higher costs from providing flood-relief measures to clients.

Loan growth in the quarter will also be lower than usual because of reduced demand, said an analyst at Finansia Syrus Securities.

Lending in flood-affected provinces, including in industrial estates, is expected to be more than Bt300 billion ($9.73 billion).

The analyst said the earnings of local banks would continue to decline from third-quarter levels through the end of the year, making earnings performance in this quarter the lowest of 2011. Overall, however, the banks had already exceeded the total earnings of last year in the first nine months of this year. Therefore, the banks have not concentrated much on their fourth-quarter performance.

The good performance in the first three quarters has prompted the banks to focus more on setting general provisions for dealing with doubtful debts instead of on boosting income in the remaining months.

"Interest income in the fourth quarter is forecast to be less than in previous quarters because of the flood crisis. This will result in lower earnings in the quarter," the analyst said.

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