Higher fees to cut bank earnings by 8.1-9.1%
Commercial banks' earnings will be cut by 8.1-9.1 per cent, if the Bank of Thailand decides to raise the deposit-based contribution to 0.55 per cent and impose fees on bills of exchange (B/E), according to DBS Vickers Securities (Thailand).
It based the forecast on the BOT's recent revelation that the deposit protection fee to Deposit Protection Agency (DPA), now at 0.40 per cent of a bank’s deposit base, may be extended to cover B/E. But the rate has not to be finalised.
The securities house came up with two scenarios.
First, if DPA fees are raised to 0.55 per cent of deposits and 0.35 per cent of B/E, the earnings will drop by 8.1 per cent. In this scenario, the cost of funds would rise by 19 basis points while the net interest margin (net interest margin) by 13 basis points. Under this scenario, it expects the earnings growth in 2012 to drop from 13.4 per cent to 4.2 per cent.
Second, if the DPA fees are raised to 0.55 per cent of deposits and 0.50 per cent of B/E, the earnings will drop by 9.1 per cent. The cost of funds will be reduced by 23 basis points while NIM by 15 basis points. Under this scenario, we expect the industry earnings growth to drop from 13.4 per cent to 3.0 per cent.
"However, the impact on each bank will differ according to its deposit and B/E mix," it noted.
Based on its estimates, Tisco Securities' NIM will suffer the biggest negative impact. On the other hand, Kasikornbank and Bangkok Bank will be the least affected, as its B/E only account for 7 per cent of total source of funds.
