Banks' Q4 net profit growth likely to be flat: analyst
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The banking industry is expected to face a challenge in improving profitability during the current quarter through to next year, even though net earnings in the third quarter are likely to have bottomed out.
Asia Plus Securities anticipates that the net profits of 10 listed commercial banks in the third quarter grew by 3.2 per cent to Bt51 billion from the previous quarter, and by 16.3 per cent year on year.
The slower quarter-on-quarter growth is due mainly to a reduction of fee income and lower profits from investment, it said.
Meanwhile, the operating profits of the banking industry in the third quarter are forecast to drop 4.3 per cent to Bt64.2 billion from the April to June period, but to show a year-on-year increase of 19 per cent.
Usanee Liurut, an analyst at Asia Plus, said that although the third quarter represented a bottoming out in the industry, net earnings growth in the current quarter would not be any higher because some banks still had to increase their loan-loss provisioning – and would also not receive any gains from the Vayupak Fund.
The trend for future net earnings in the industry is likely to be one of slower growth because of the delay in public investment, which is the only hope for driving gross domestic product, she said, adding that the profitability of the sector was dependent on GDP growth.
Asia Plus estimates the net profits of the banking sector next year will grow by just 9.8 per cent, against a projected 23.4 per cent this year.
“If public spending through the Bt2-trillion investment programme does not happen next year, it will be negative for private investment and domestic consumptions and will affect the profitability of the banking industry,” the analyst said.
External factors such as the slower growth of the Chinese economy and capital outflows from the tapering of quantitative-easing programmes also remain pressure points on the profitability of banks, she said.
Commenting on the third-quarter profits of the banking industry, Usanee said bad sentiment in the stock market in the period had pressured fee income at the banks’ securities arms, while the quarter was also the low season for bancassurance, resulting in fee income dropping by 0.3 per cent from the previous three months.
Thanachart Capital, Bangkok Bank and LH Financial Group are all expected to report a reduction in net earnings in the third quarter, due to the fall in fee income.
Thanachart Capital had no additional gain in the period, after booking extra profit of Bt4 billion from selling life-insurance units in the second quarter, she said.
The net profits of TMB Bank, Bank of Ayudhya and Krung Thai Bank are expected to outperform their peers.
In terms of loan growth, TMB is unlikely to reach its target in the third quarter, but the bank will not have to increase its loan-loss reserve after setting huge extra provisioning in the previous quarter, she added.
The sector as a whole returned to normal provisioning in the third quarter after setting extra reserves as counter-cyclical provisions to comply with Bank of Thailand guidelines.
Meanwhile, the ratio of non-performing loans in the period is forecast to be unchanged from the second quarter, the analyst said.
Banks’ interest income from July to September is expected to rise by 2.3 per cent quarter on quarter, in line with loan growth of 2.3 per cent, and by 10.7 per cent year on year.
Loan growth in the first nine months is expected to have increased by 8 per cent from the end of last year, as a result of which Asia Plus estimates full-year lending growth of 9.8 per cent.
An analyst at Finansia Syrus Securities said in a research note that the net profits of nine listed banks are expected to reach Bt51 billion, representing rises of 3.6 per cent quarter on quarter and 17.2 per cent year on year.
Krung Thai Bank and Siam Commercial Bank are likely to report the highest earnings in the sector, due to their buoyant non-interest income.
