Higher reserves to drag down banking profits
THE stubborn sluggishness of the economy has swollen non-performing loans, forcing banks to keep hiking reserves.
In their quarterly filings to the Stock Exchange of Thailand, banks said the economic recovery remained slower than expected.
TMB Analytics, the research unit of TMB Bank, said the banking industry is expected to slow down in synch with the lags in investment and consumption. As of the end of May, the outstanding loans of 17 local banks were up 3.8 per cent from the same month last year but only 0.7 per cent from the end of last year.
Kasikornbank, the fourth largest by assets, which outperformed its peers in the first quarter in net profit growth, witnessed a slowdown in the second quarter due mainly to a high loan loss provision of Bt2.03 billion.
KBank’s second-quarter net profit was Bt11.47 billion, down 7.5 per cent from the first quarter. In the first half, its net profit inched up 0.9 per cent year on year to Bt23.88 billion. Its coverage ratio as of June 30 was 138.1 per cent, slipping from 139.7 per cent in the first quarter.
Its gross NPL ratio rose to 2.39 per cent from 2.26 per cent in the previous quarter and 2.24 per cent at the end of last year, mainly due to sour SME loans. KBank is the biggest SME lender.
The bank’s loans year-to-date climbed by 2.6 per cent, as it extended financial assistance to its SME customers that have been struggling with the economic fragility.
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Siam Commercial Bank saw its NPLs rising 2.22 per cent for the first half of this year while lending grew a low 0.3 per cent during the same period. The bank set aside Bt5.13 billion in loan loss provisions for the second quarter, up from Bt3.6 billion for the first quarter and Bt3.22 billion for the same quarter last year.
The higher provision has caused a fall in the bank’s net profit for the first half of this year, dropping 5.3 per cent year on year to Bt26.37 billion.
To cope with rising NPLs among SME customers, TMB Bank, the seventh by assets, has set aside reserves of Bt1.35 billion, lower than its provisioning of Bt2.38 billion in the first quarter.
However, provisions in the first six months surged 154 per cent to Bt3.73 billion, more than double the Bt1.47 billion taken in the same half of last year. This was needed to limit downside risk amid the bleak economic environment and to conservatively accommodate the surge in NPLs to 3.09 per cent from 2.85 per cent as of the end of last year.
TMB’s net profit in the first half was Bt3.89 billion, falling by 6.7 per cent from the same half last year.
CIMB Thai Bank’s net profit in the second quarter plummeted by 44.3 per cent to Bt277.2 million, mainly due to a 138.5-per-cent year-on-year increase in provisions. NPLs shot up to 3.9 per cent from 3.3 per cent.
Double policy rate cuts
In the first half, the bank earned Bt348.16 million, declining from Bt625.32 million a year earlier.
The double policy rate cuts have benefited auto lenders, but weak car sales at home have continued to brake loan growth. Bank players in the hire purchase market are still facing an uptrend in NPLs.
Tisco Financial Group reported first-half net profit of Bt2.19 billion, higher by 14 per cent than the same half last year. The group’s loan portfolio has shrunk by 5.1 per cent so far this year due to slower demand for auto loans and floorplan financing.
Tisco’s loan loss provisions surged 28 per cent to Bt1.24 billion in the second quarter from the previous quarter, as its NPL ratio edged up to 2.86 per cent from 2.65 per cent.
Kiatnakin Bank’s net income climbed 4.4 per cent in the first half to Bt1.41 billion, while loans dropped by 4.8 per cent and NPLs increased to 6.9 per cent from 5.6 per cent at the end of last year.
