Uncertain impacts on banks' fourth-quarter earnings
Banks posted an increase in earnings in third-quarter results, but uncertainty clouds their outlook for the fourth quarter in the wake of the disastrous floods.
Siam Commercial Bank (SCB) recorded the highest net profit –Bt8.4 billion, a 2.7percent rise quarter on quarter – among six banks that announced their results. As of September 30, SCB had net profits of Bt29.53 billion, up from Bt18.17 billion in the same nine months of last year.
Kasikornbank reported consolidated net profit of Bt7.76 billion, up 40.70 per cent from the same quarter last year and up 6.05 per cent from the second quarter.
LH Financial Group reported consolidated net profit of Bt123.22 million, up from Bt113.06 million over the same quarter last year.
TMB Bank showed consolidated net profit of Bt750 million, an increase of 3.2 per cent year on year, while CIMB Thai posted a 78percent increase in quarterly earnings to Bt319.7 million.
Tisco Bank reported a net profit of Bt899 million for the third quarter, up 23 per cent year on year and 4.1 per cent quarter on quarter. In the first nine months, net earnings were Bt2.6 billion.
Tisco securities said in its research, after asking the seven banks about the impact of the flood crisis, that their loan-growth targets this year would be unchanged.
However, the securities house expects banks to begin lowering their growth targets in the fourth quarter after announcing third-quarter results this week. The flooding situation continues to remain grim and banks could not yet evaluate how the floods will impact on loan growth, net interest margins and asset quality.
The seven banks are Bangkok Bank, Kasikornbank, Siam Commercial Bank, Krung Thai Bank, TMB Bank, Bank of Ayudhya and Thanachart Capital.
The Finance Ministry predicted that the damage could shave 11.7 percentage points off growth in gross domestic product. Assuming loan growth at 1.5 times GDP growth, that would mean that banks’ loan growth will fall 1.52.5 percentage points, according to Tisco research.
On average, if loan growth drops by 1 percentage point, it would shave banks’ earnings by 1.2 per cent. The highest impact is on TMB (2.3 per cent) and the lowest on SCB (0.7 per cent).
The securities firm noted that the results of banks might be affected after launching relief packages, which would incur a higher financial cost by 5 basis points compared with financial packages.
The greatest impact is on TMB (3.4 per cent) while SCB is the least affected (1.4 per cent).
Tisco Securities, however, expects the flooding to have only a slight affect on the banks’ operations.
