Reserves for NPLs, high expenses to keep banks’ net profits low
Commercial banks' third-quarter net profit is expected to slump year on year due to high reserves for doubtful debts and expenses, experts said on Monday.
Tanadech Rungsrithananon, senior director of research at UOB Kay Hian Securities, expects commercial banks' third-quarter net profit to be Bt32 billion, down 42 per cent year on year, but up 4 per cent quarter on quarter due to a high reserve for doubtful debts and expenses.
Meanwhile, he expects banks' net interest margin (NIM) to be at 2.8 per cent, down from 3.15 per cent in the same period of the previous year and 2.95 per cent in the second quarter of this year owing to interest rate adjustment. Banks’ NIM is expected to remain at a low level until next year.
Non-performing loans (NPL), he said, will be at 3.3 per cent, up from 3.1 per cent in the previous quarter due to the impact of Covid-19 on businesses that rely on foreign tourists, such as hotels and tourism agencies.
"We expect bank shares to drop and NPLs to rise further in the fourth quarter of this year once the government's measures to help people expires,” he said.
He added that commercial banks’ net profit this year is expected to be at Bt140 billion, down 34 per cent from Bt201 billion in the previous year and the lowest in 10 years. However, net profits for banks are expected to rise 5 per cent year on year to Bt146 billion owing to high reserves for doubtful debts and expenses.
“However, it will take several years for banks’ net profits to rise to Bt200 billion like in previous years, and it actually depends on banks’ methods of controlling NPLs as well,” he added.
Meanwhile, Tanawat Ruenbanterng, an analyst at Tisco Securities expects banks' third-quarter net profit to be at Bt31.23 billion, down 38.6 per cent from Bt50.82 billion in the same period of the previous year, but up 10.6 per cent from Bt28.24 billion in the second quarter.
He also expects the net profits of all banks, except Bangkok Bank and Kasikornbank to drop owing to high reserves for doubtful debts and a drop in NIM.
