Earnings forecasts cut for SSI's three lenders
Analysts have revised down their forecasts for the full-year earnings of the three banks that have to boost reserves against Sahaviriya Steel Industries (SSI) and write off loans to the steelmaker's subsidiary in the United Kingdom.
Based on 100-per-cent reserves against SSI, Tisco Financial Group will have the highest impact to its earnings in the view of securities houses.
Tisco will provision Bt1.5 billion, which will hit its net profit by about 10 per cent, according to an analyst at Krungsri Securities (KSS), which revised down the net-profit projection for Tisco to Bt3.6 billion from Bt4 billion.
The net profit of Krungthai Bank (KTB) is expected to drop 9 per cent to Bt27.9 billion from Bt30.6 billion after it sets aside Bt9 billion, according to KSS.
Siam Commercial Bank (SCB) has the lowest impact since it will realise a gain on investment to offset the provisioning of Bt11 billion, it said.
SCB’s net is expected to fall by 3 per cent to Bt47.1 billion.
According to Phillip Securities (Thailand), the full reserves for SSI’s debt among the three banks will drag the net profits of the whole banking industry down by 5.8 per cent to Bt200 billion, which is 2.6 per cent off last year’s result.
The securities house has cut its forecast for the three bank’s net profits this year to Bt51 billion from Bt53 billion for SCB, Bt23 billion from Bt30 billion for KTB and Bt3.3 billion from the previous projection of Bt4.5 billion for Tisco.
The three banks will classify SSI’s debts as non-performing loans this quarter after bringing reserves up to 100 per cent in the period.
KGI Securities (Thailand) said in a research note that after classifying SSI loans as non-performing, NPL coverage of the three banks would slip sharply to below 90 per cent from over 100 per cent.
The banks will have to keep their coverage at more than 100 per cent, so they have to take provisions, which will erode the net profit of each bank.
KTB’s NPL coverage will decline to 86 per cent from 125 per cent and SCB’s coverage will fall to 88 per cent from 135 per cent. SCB’s coverage for SSI will dive to 69 per cent from 107 per cent.
SCB and KTB can rebuild their NPL coverage to above 100 per cent this year, but Tisco might need two years or more to increase its NPL coverage to 100 per cent, according to KGI Securities (Thailand).
Ronadol Numnonda, assistant governor of the Bank of Thailand, said that if SSI’s entire debt of Bt53.346 billion were classified as NPLs, the banking industry’s gross NPL rate would increase slightly to 2.86 per cent from 2.46 per cent currently. However, this increase will not have an impact on the stability of the financial system. Furthermore, the three lenders have set aside sufficient provisions to cover the SSI case.
