Big Thai banks keep payouts low to boost capital

Capital positions are well beyond regulatory requirements.

Big banks in Thailand enjoy solid capital positions that would enable them to raise payouts but their smaller peers are taking the lead in doling out high dividends, according to Maybank Kim Eng.

Also read: Singapore banks' dividend yield eclipse ASEAN peers

Bangkok Bank has a Tier I ratio of 16.8% and a capital ratio of 18.4% in 2018, well beyond what is required by regulators. Siam Commercial Bank also enjoys a strong capital position with Tier I and capital ratios of 15.1% and 17.1% respectively. Kasikornbank's Tier 1 ratio and capital ratio stands at 14.8% and 17.3% respectively whilst Krungthai Bank has ratios of 14.5% and 18.2% respectively. Systemwide liquidity coverage ratio also remains high at 184% in 2018.

As a result of their growing capital base and weak earnings growth, the ROEs of big banks have dropped to the 8-11% range in 2018 from 11-20% in 2014. "Whilst we believe BBL, KBANK and SCB have solid capital positions to raise their payouts, we reckon they would prefer to build capital for unexpected events and regulations," Jesada Techahusdin, CFA, said in a report.

The central bank's minimum requirements for CET1, Tier-1 and capital are 7.5%, 9.0% and 11.5% for 2019 and 8.0%, 9.5% and 12.0% for 2020.

In contrast to the big players, small banks have been paying high dividends to keep ROEs high. TISCO’s DPS increased to THB7 for an 80% payout in 2018 and ROE also rose to 19.4% from 15.8% in 2015. KKP’s DPS went up to THB5-6 for 70-92% payouts in 2016-18. Its ROE rose to 14.5% in 2018 from 8.9% in 2015. "As TISCO and KKP had strong 17.4% and 12.5% CET-1 in 2018, we expect them to pay high THB7/THB5 DPS this year," Techahusdin added.

Bank earnings are expected to grow 5% by FY20 amidst lower provision expenses following stable NPL formation. Loans are expected to grow between 4-5% by end-2019.