No adverse impact on banks' performance from debt moratorium

To help debtors cope with the recent Covid-19 outbreak, the Bank of Thailand (BOT) had instructed financial institutions to extend the debt moratorium until June 30 this year from December 31 last year.

Tanawat Ruenbanterng, an analyst at Tisco Securities, said the extension of BOT's measures would only affect commercial banks' interest income, effective interest rate and net interest margin (NIM).

He said the banks would benefit from the decline in non-performing loans (NPLs), as they don't have to set up more reserve fund.

He didn't expect these measures to erode banks' net profit because they would not be issuing measures to cut the interest rate as much as in the previous year.

"However, investors should monitor the banks' moves to set up a reserve fund, as the number of NPLs would increase if the Covid-19 situation is prolonged," he said.

He added that commercial banks' fourth-quarter net profit would recover as their share price had risen from the influx of foreign funds.

"However, bank shares are still not attractive among investors," he added.

An analyst at Capital Nomura Securities said the extension by BOT of the moratorium would have less effect on commercial banks because the measures aim to enable debtors to restructure debt.

He added that debt restructuring would enable banks to realise interest revenue in line with the Thai Financial Reporting Standard and reduce NPLs.

"Therefore, we still advise investors to buy bank shares," he said.

An analyst at Asia Plus Securities expected the number of debtors participating in BOT's measures this year to be lower than last year because the new Covid-19 outbreak is likely to cause less impact on the economy.

Although the debt restructuring will affect banks' NIM, they have more time to manage asset quality of debtors with high risk," he said.