FRIDAY, March 29, 2024
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KResearch sees slim gains for banks

KResearch sees slim gains for banks

BANKS in the remaining quarters of this year will probably not show impressive profits as they might have to maintain a high level of provisioning and cost controls after signs in the first quarter showed the economic recovery was slower than expected, ac

Thanyalak Vacharachaisurapol, head of money and banking at the research house, said yesterday that if exports can pick up this quarter and the government begins spending on its investment projects, lending should continue expanding from last quarter.
KResearch has kept its loan-growth projection for the banking industry at 7-8 per cent, against 4.5 per cent last year, as lending revived somewhat in March.
“We believe banks will become more cautious about extending credit, while they have to manage interest and non-interest expenses because profits could be affected by high loan-loss provisions. 
“Banks will stay with their prudent provisioning policy to prepare for the poor quality of debt, which will trail the economy,” he said.
Amid the worse-than-expected economy, all banks are expected to move to the same customers – those they believe will not hurt their performance. The banks might trade off prices, and this will squeeze their net interest margins (NIMs).
Banks were in the first batch of listed companies reporting quarterly results, as loan growth and non-performing-loan ratios are important indicators of the economy’s condition. 
The industry reported first-quarter net profit rising 3.1 per cent from the same quarter last year to Bt53.73 billion. 
Several banks suggested that the economic recovery in the first quarter was slower than expected mainly because of subdued purchasing power, towering household debt and dimmer confidence in the economy getting back on track.
Loans in the first three months expanded by 2.4 per cent. The relatively low lending activity dampened interest and non-interest incomes.
Fee income of the banking industry in the first quarter grew only 1-2 per cent and NIM dropped to 3.05 per cent from 3.11 per cent as of the end of last year. SCB Securities said in a research note that lending was expected to pick up gradually in the second quarter before shifting into high gear in the second half, led by progress in public investment, the return of inventory stocking upon the end of a destocking cycle, and a resumption in domestic consumption. 
However, auto loans are expected to see no growth in 2015 because of high repayment of loans extended during the unusual peak in 2012-13.
 Bank of Ayudhya, or Krungsri, which reported 32.6-per-cent net profit growth and 21.9-per-cent loan growth in the first quarter thanks to inorganic growth from its merger with the Bank of Tokyo-Mitsubishi UFJ’s Bangkok branch in January, expects the recovery to regain momentum in the latter part of the year. 
Krungsri has left its loan-growth target in the range of 7-9 per cent for 2015, while Krungthai Bank and Kasikornbank are considering slashing their forecasts after the domestic economy showed it was taking a less steep growth trajectory.
KTB’s first-quarter net profit dropped 5.23 per cent amid flat lending and a thinner NIM. KBank’s net profit expanded 3.8 per cent but its loans increased by only 1.4 per cent – well behind its target of 7-9 per cent this year. 
TMB Analytics said lending was expected to recover this year but the lowinterestrate environment would pressure banks’ interest income.
Outstanding loans are expected to show an increase of 78 per cent or about Bt800 billion from last year, when loan growth was only 5 per cent, the lowest in five years. 
In the preceding four years, the growth rate ran 1115 per cent.
TMB Analytics forecasts 5percent growth in deposits, or a net Bt600 billion in new deposits.
However, banks may need to boost noninterest income in light of the lowinterestrate environment. After the Bank of Thailand decided last month to drop the policy rate to 1.75 per cent, it is unlikely that interest rates will move up in the near future.
Banks’ feebased income has increased from 15.8 per cent of total revenue in 2012 to 16.3 per cent in 2013 and 17 per cent and 2014.
 

 

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