Full-year forecasts to rise as banks post healthy Q1 results

Securities companies have said in their research notes that they are planning to raise their forecasts for bank earnings for the year.
Siam Commercial Bank (SCB) and Kasikornbank have already won upgrades from some brokerages after they turned in better performances than expected.
Finansia Syrus Securities raised the 2012 net-profit forecast for SCB by 7 per cent to Bt39 billion and for KBank by 3 per cent to Bt31.8 billion.
SCB was the most profitable with Bt10.3 billion, up 29.4 per cent from a year earlier, excluding the capital gain from acquiring a Bt5.1-billion stake in SCB Life that was booked in March. Including the gain, net profit dropped by 20.8 per cent.
SCB was followed by KBank with net profit of Bt8.9 billion, up 47 per cent, and Bangkok Bank with Bt8.08 billion, up 25 per cent.
LH Financial Group posted the highest quarterly profit growth at 53.95 per cent and Kiatnakin Bank the lowest at 7 per cent.
Krungsri Securities said the banking sector showed record quarterly net income mainly on a lower cost-to-income ratio and lower loan loss provisions. SCB and KBank are rated as “outperform” and Kiatnakin as “underperform”.
Globlex Securities said the key drivers for the successful quarter were lower cost-to-income ratio, reduction of corporate income tax to 23 per cent from 30 per cent, normalised loan loss provisions, loan expansion and higher fee income.
In the fourth quarter of last year, banks suffered a higher cost-to-income ratio due to flood-relief measures for customers and staff, which hit earnings.
When the situation returned to normal, their cost-to-income ratio improved greatly. SCB’s ratio in the first quarter was 40.9 per cent, down from 49.8 per cent in the fourth quarter of last year and 41.3 per cent in the first quarter of last year.
The ratio at Bangkok Bank declined to 40.77 per cent from 50.3 per cent and 41.63 per cent and at KBank to 41.4 per cent from 56.1 per cent and 48.3 per cent.
Larger banks showed higher earnings than expected, especially SCB and KBank, which booked profit from their insurance subsidiaries, according to Globlex Securities.
First-quarter non-interest income increased 12 per cent at KBank and 11.6 per cent at SCB.
Loan growth helped boost fee income from transactions related to loans.
After the flood, businesses required loans for improving operations at their plants and for investment, while the central bank launched a soft-loan scheme. These factors helped banks show outstanding growth.
This quarter, bank lending is expected to gain momentum in line with the surge in investment by businesses of all sizes, while retail loans, especially auto loans, should return to the growth path.