Krung Thai Bank's Q1 net profit slips 17% YoY to $187m

Higher provisions against rising NPLs triggered the fall.

Krung Thai Bank (KTB) posted a lower than expected Q1 2020 net profit of $187m (THB6.1b), down 17% YoY primarily due to higher provisions against rising non-performing loans and muted fee income, noted UOB Kay Hian in a report.

Total loans grew 1.9% QoQ on the back of private corporate lending, but fundamentals were partially eroded due to the pandemic. UOB expects a larger impact from the pandemic to decay loan growth. As a result, loans will likely soften come Q2 amidst a national lockdown and dwindling economic activity. Loan growth is likely to dip 1% YoY this year and rebound 3% YoY in 2021.

Gross NPLs jumped 9.5% YoY to $3.4b (THB112.4b) due to higher SME and retail NPLs, with a relatively flat NPL ratio at 4.4% YoY in Q1. KTB has allotted higher provisions against elevated NPLs and bolstered its balance sheet, the report said.

Credit cost increased YoY to 160bp in Q1 2020 from 144bp in the same quarter last year, whilst loan loss coverage slipped to 127% in Q1 2020 from 132% in Q4 2019.

The lender’s cost-to-income ratio (CIR) of 44.2% in Q1 would likely be the lowest for 2020 as it is expected to rise in the coming quarters due to slower revenue as well as IT investments into digital banking services, the report said. KTB’s CIRs are likely to be high at 47.5-49% in 2020 to 2022, which will slow down ROE to 6.6-6.7% over the same period, the report concluded.