Strong bank earnings expected in Q3
Thai banks should continue strong quarterly earning growth with 33 per cent year-on-year and 7 per cent quarter-to-quarter growth rate
Attributing to this are strong lending growth, higher net interest margins and non-interest income growth, said CIMB Securities (Thailand). The house projects 26 per cent core earnings growth for the local banking sector in fiscal year 2011 and 2012.
It noted that capital expenditures of the private sector and public spending in infrastructue projects should further drive lending growth for the next few years.
Meanwhile, less competition for long-term deposits should improve net interest margins while insurance business continues to provide banks with non-interest income.
As for cost control, most local banks are now efficient in managing their operating expenses. Banks' cost-to-income ratio has fallen from 49 per cent in Q3 2010, 48 per cent in Q2 2011 and is projected at 47 per cent for the third quarter of this year.
Banks' cost-to-income ratio have gradually improved over the past few years - 49 per cent in the third quarter of 2010; 48 per cent in the first quarter of 2011; and 47 per cent in the second quarter of 2011.
In addition, Thai banks' fundamentals are strong with capital bases averaging 14.9 per cent of total capital adequacy ratio (CAR) and 10.6 per cent in Tier 1.
Negligible operating exposures outside Thailand also limits the negative impacts of foreign external risks.
