Banks' net profit to grow 2.3 per cent in the first quarter

The rise in first-quarter net profit from the previous quarter would be 4.8 per cent, while the rise for the whole year would be 7.4 per cent thanks to the expected increase in high-return small- and medium-sized enterprise credit and the attempt to lower borrowing costs through decrease in deposits, Maybank Kim Eng Securities (Thailand) said in a research note yesterday.

It recently cut its estimate for banks’ 2015 credit growth to 5.6 per cent from 6.9 per cent because of the sluggish economic recovery.

Demand for business credit is expected to come from SMEs. That may prompt banks relying on SME credit, like Kasikornbank, TMB Bank and Krungthai Bank to report higher credit growth.

Banks’ fee-based income growth would be close to zero, while banks have been trying to control their costs. Non-performing loans remain steady.

Bangkok Bank and KTB have seen pressure on their net interest margin (NIM), given increased cost of borrowing after raising deposits in the fourth quarter of last year.

BBL is expected to see net interest margin (NIM) shrink 20-25 satang quarter on quarter, while KTB is projected to show a 10-15-satang cut in its NIM.

The pressure on NIMs would continue for one more quarter as a result of cuts in deposit and loan rates.

Despite the unsatisfactory economic indicators that may not support investment in banking stocks and lower-than-expected net profit, bank stocks are not expensive and drops in stock prices are investment opportunities.

The banking group is trading at a forward price-to-earnings ratio of 10.

KBank is the most outstanding for investment in the short and long terms due to its satisfactory operating management and asset quality control.

KTB is the best representative for state investment growth, the securities house added.