Published on July 7, 2007
Brokerages predict that the earnings of Bangkok Bank and Siam Commercial Bank will be outstanding, while Bang of Ayudhya and TMB Bank are likely to see less attractive earnings.
An analyst from Far-East Securities said yesterday that banks' earnings in the quarter were expected to total Bt19 billion, lower than the Bt20.46 billion recorded in the first three months of the year.
The lower net profit is due to a lack of extra income the banks received from Vayupak Fund dividends, although they will have higher fee income. In the second quarter, banks still have to record higher operating costs, the analyst said.
First-quarter earnings of Bt20.46 billion declined 22 per cent from the same period last year as banks had to set aside more provisioning to meet the International Accounting Standard 39 (IAS39).
The analyst believes that the banks recording higher second-quarter net profit both quarter on quarter and year on year are Bangkok Bank, Siam Commercial Bank and Tisco Bank - at Bt5.4 billion, Bt4.28 billion and Bt400 million, respectively. Siam Commercial Bank's lending and fee income has grown significantly, while Tisco's funding costs have fallen as a result of lower interest rates.
Bank of Ayudhya, Siam City Bank and TMB Bank are expected to record lower net profit both quarter on quarter and year on year, as they are likely to record high provisioning for IAS39 in the second quarter. TMB may record a loss.
An analyst from Kim Eng Securities said yesterday that most banks were likely to record lower profits, with Bank of Ayudhya recording the deepest fall. The bank is likely to set provisioning of Bt7.5 billion for the entire year.
Kim Eng believes Bank of Ayudhya's net profit will be lower than Bt100 million, while TMB is expected to record a loss.
An analyst from Siam City Securities said most banks would reduce their interest rates following the Bank of Thailand's recent policy-rate cut to 3.5 per cent - 150 basis points lower than at the end of last year. A lower deposit rate will squeeze banks' interest margins, while the economic slow-down has made their lending growth sluggish, he said.
However, the analyst believes their earnings for the second half of the year are likely to improve, as lending and economic growth are expected to recover during this period.
According to Finansa Securities' latest report, lending in May by 10 banks covered by the securities firm expanded only 0.5 per cent month on month and 0.7 per cent year to date, to Bt4.5 trillion.
Banks with the highest lending growth during the period are Krung Thai Bank with 2.1 per cent month on month, Kiatnakin Bank with 1.6 per cent and Tisco Bank with 1.4 per cent.