Small banks' 2011 profits jump but outlook dimmer
The profits of three small commercial banks increased by 8 per cent in 2011, totalling Bt6.62 billion, but those banks are expected to face higher financing costs and lower spreads due to the pressure of the Financial Institute Development Fund (FIDF) deb
The three banks are Tisco Financial Group, Kiatnakin Bank and LH Bank.
Of their total combined net profit of Bt6.62 billion, Tisco Financial Group recorded net profit of Bt3.26 billion, increasing from Bt2.88 billion; Kiatnakin Bank showed net profit of Bt2.86 billion, up 0.6 per cent year on year; and LH Bank reported net profit of Bt495.83 million against Bt408.12 million last year.
The growth in net profit showed the ability of small banks to expand the amount of loans, higher net-interest incomes and higher fee incomes despite the massive flood in the fourth quarter.
Tisco’s interest income was Bt6.9 billion, up from Bt6.86 billion, and non-interest income rose to Bt1.31 billion from Bt1.05 billion.
Kiatnakin’s net interest income increased by 11.2 per cent mainly on loan growth of 26.5 per cent, while non-net-interest income grew by 23.2 per cent from the bancassurance business.
LH Bank’s interest income increased by 17.30 per cent to Bt1.7 billion and non-net-interest income surged by 163.41 per cent to Bt168.86 million.
However, analysts said in research notes yesterday that they might forecast lower earnings of small banks in 2012 because they are under pressure from higher financing costs and fee collection from bills of exchange (B/Es).
The forecasts for Tisco and Kiatnakin are expected to be lowered by brokerage houses because both banks have relatively high B/E ratios.
If banks become subject to Deposit Protection Agency premiums on B/Es, which now contribute 0.4 per cent of Tisco’s deposit base, the bank’s net profit will decline by 15 per cent to Bt3.14 billion, according to Finansia Syrus Securities. The proposed DPA premium adjustments are aimed at tackling the massive FIDF debt left over from the 1997 crisis.
Tisco’s total deposit base is Bt172 billion, of which 75 per cent is B/Es.
An analyst at Finansia noted that Tisco at present had higher costs from offering higher interest for deposits, and if the bank had to contribute DPA premiums for B/Es, its net profit would be hit considerably.
Bualuang Securities has lowered its expectation of Kiatnakin’s net profit in 2012 to Bt3 billion because of higher financing cost and the move on bills of exchange. B/Es account for 49 per cent of Kitanakin’s deposit base.
