Tuesday, September 29, 2020

Bank stocks take Bt700bn hit from months of mass sell-offs

Jul 22. 2020
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By The Nation

Institutional investors have reduced the proportion of banking stocks in their portfolios as share prices continue their downward trend in 2020.

As of July 20, the banking index had contracted 36.62 per cent while the Stock Exchange of Thailand (SET) Index had fallen 14.02 per cent this year.

Most Thai banking stocks have fallen 30-40 per cent this year, though shares in CIMB Thai Bank (CIMBT) have risen by 11.32 per cent. Meanwhile, banks' market capitalisation is Bt1.23 trillion, down by as much as Bt700 billion.

The downward trend shows that institutional investors' mass sell-offs are still pressuring share prices, especially of large banks.

This year, major domestic and foreign investors have reduced their holdings of Tisco Financial Group (Tisco) shares from 505.76 million to 408.49 million shares, down 19.23 per cent.

The Social Security Office (SSO) has cut its Tisco shareholding proportion from 3.13 per cent to 1.86 per cent, Krungsri Dividend Stock Long Term Equity Fund from 2.78 per cent to 1.95 per cent, and the Thai Non-Voting Depository Receipt (ThaiNVDR) from 13.34 to 11.17 per cent.

Meanwhile, major Bangkok Bank (BBL) shareholders have reduced their holdings from 1.16 billion to 1.01 billion shares, down 13.01 per cent. ThaiNVDR cut its BBL shareholding from 31.12 per cent to 23.5 per cent, though South East Asia UK and SSO increased BBL shares in their portfolios to 5.17 per cent and 4.5 per cent, respectively.

Major shareholders, especially ThaiNVDR, have also reduced their proportion of Siam Commercial Bank (SCB), Kasikorn Bank (KBANK) and Kiatnakin Bank (KKP) shares, though the SSO increased its ratio of SCB and KBANK shares.

Banks enjoying increased shareholding ratios were Krungthai Bank (KTB) at 2.64 per cent, TMB Bank (TMB) at 46.48 per cent, Thanachart Capital (TCAP) at 3.23 per cent, and LH Financial Group (LHFG) at 1.6 per cent. Shareholding ratios for Bank of Ayudhya (BAY) and CIMBT have remained the same as last year.

Korakot Sawetkruttamat, assistant director at Kasikorn Securities' Research Division, said that banks’ shareholding ratio was very low because they still have risks and their share price had dropped sharply.

"We expect net profits of banks that have extended lots of allowances for doubtful accounts to increase in the second half of this year because their profits [will have] bottomed out during the lockdown," he said.

"However, net profit of banks that have not extended much allowance for doubtful accounts would drop after the measure to suspend debt repayments ends."

He added that the ratio of banks’ share prices to book value was currently at 0.5 times or minus-2.5 standard deviation.

"If the situation gets worse, the price of bank shares will drop by another 10 to 15 per cent," he predicted.

"On the other hand, if the situation is not too bad, there is a 30 to 35 per cent chance that the price of bank shares' can be traded at minus-2 standard deviation."

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