Likely hike in deposit premium clouds banks' forecast

Bank loans are expected to continue to expand this quarter, but past that the trend is uncertain. Banks are being called on to help pay off the debt of the Financial Institutions Development Fund (FIDF) through a higher level on their deposit base.
Except for Thanachart Bank, whose net profit dropped by 11.3 per cent to Bt5 billion due to huge merger expenses, all banks showed improved results.
Siam Commercial Bank (SCB) reported the highest annual net profit of Bt36.27 billion among 11 banks. Its earnings shot up by 49.85 per cent for the year but in the fourth quarter, its earnings slipped by 19.3 per cent from the previous quarter.
Bangkok Bank, the largest by assets, reported an increase of 11.2 per cent in net profit to Bt27.34 billion.
However, its fourth-quarter earnings fell by 9.3 per cent to Bt6.61 billion quarter on quarter.
Its net interest margin improved to 2.76 per cent from 2.64 per cent a year earlier due to the strong loan growth and upward trend of interest rates.
Krung Thai Bank logged a net profit increase of 14.08 per cent |to Bt17.01 billion, helped by a 27-per-cent surge in net interest income to Bt50.38 billion and a 10-per-cent rise in fee income to Bt11.37 billion.
Earnings growth at Bank of Ayudhya (BAY) would have been higher than the 5.5 per cent that it reported had it not taken a Bt12.4-billion deferred tax provision in the fourth quarter.
BAY, Tisco and Kasikornbank are the three banks that provisioned for deferred taxes, but KBank has not released its 2011 earnings yet.
An analyst at Asia Plus Securities said last week that the financial results for only the fourth quarter of 2011, especially for small banks, were below its expectations due to the adjustment for deferred tax liabilities and for net interest margin (NIM) due to the flood.
Tisco Financial Group reported an increase in earnings of 13.10 per cent to Bt3.26 billion for all of last year. However, for the fourth quarter, earnings edged down 1 per cent year on year and 25 per cent quarter on quarter due to a Bt127-million deferred tax provision in the quarter.
Tisco’s NIM slipped to 2.82 per cent in the fourth quarter from 3.54 per cent in the previous quarter and 3.68 per cent in the same quarter during the previous year, due to fierce competition to mobilise deposits and to price loans.
Kiatnakin's spread narrowed to 4.3 per cent from 5.2 per cent year on year. In the fourth quarter, its spread sank to 3.8 per cent from |4.1 per cent in the previous quarter due to an increase in the cost of funds.
As a result, the yearly net profit of Kiatnakin barely increased by 0.66 per cent to Bt2.86 billion.
An Asia Plus analyst predicts that the banking industry this quarter could enjoy a revival in corporate loans, as companies invest in recovery from the flood. Retail loans could follow next quarter.
However, it is unclear whether spreads will be better next quarter. Because of the higher cost of funds from the hike in the Deposit Protection Agency fee, bank earnings are at risk, the analyst said.