Thai banks' earnings down 20% in Q2: UOBKH

But banks may be able to pay dividends due to their solid capital.

Thai banks are expected to post combined earnings of around $1.29b in Q2, down 20% YoY from a year earlier and 12% QoQ weaker than the previous month, reports UOB Kay Hian.

For the first six months of the year, aggregate earnings are expected to have decreased 17% YoY to $2.8b on the back of higher provisions and lower non-interest income.

The lower earnings are a result of banks providing debt relief scheme and soft loans to customers to reduce their financial burdens amidst the ongoing pandemic, totaling more than $215.87b (BHT6.8t). About 11.5 million retail customers, 1.14 million small and medium enterprises (SMEs), and 5,000 corporates have registered for the relief programmes.

However, some of the affected loans could be downgraded to non-performing loans (NPLs), noted UOBKH analyst Tanadech Rungsrithanano. This may result to NPLs rising significantly and may require banks to set aside higher provisions.

Despite the gloomy outlook for banks’ Q2 performances, the sector’s aggregate loans are expected to rise 3.1% QoQ in Q2 and 4.6% in H1. This is largely due to higher corporate and SME lending thanks to soft loan schemes.

“We anticipate higher loan growth amongst large banks like Bangkok Bank (BBL), Kasikornbank, Krung Thai Bank (KTB), and Siam Commercial Bank (SCB). Bank of Ayudhya, Thanachart Bank, Tisco Bank, and TMB are expected to see a decline in loans, partly due to weaker auto HP loans and credit card loans,” Rungsrithanano said, adding that full-year loan growth is expected to elevate to 4.4% YoY in 2020 compared to only 2.2% in 2019.

Further, although the Bank of Thailand (BoT) has ordered lenders to suspend interim dividends for 2020 and halt share buybacks to preserve capital, Thai banks are expected to be able to pay dividends for 2020 due to their solid capital, according to Rungsrithanano.

However, consumer loans remain lacklustre due to the lockdown, stricter credit policy, and high household debts.

TMB to post growth; others falter
Of the eight banks studied by UOBKH, Bangkok-based transactional lender TMB Bank is expected to post a 50% YoY growth in Q2 largely due to a rise in operating income from its acquisition of Thanachart Bank in Q4 2019.

However, TMB Bank’s net profit is likely to decline around 31% QoQ due to lower fee income as a result of the lockdown period, as well as higher provisions to assist in NPLs.

BBL, Kasikornbank, and Tisco Bank would all experience lower net interest income from lower net interest margins (NIMs) and lower fee income. On the upside, their profits are likely to rise when compared to Q1. BBL’s net profit is expected to rise in Q2 due to higher non-interest income after it recorded a huge loss of $57.9m in Q1. A rise in net profits is also likely for Kasikornbank and Tisco, to be underpinned by lower provisions after it set aside extra provisions in Q1.

On the other hand, the Bank of Ayudhya, KTB, SCB and Thanachart Bank would be due to lower net interest income on the back of NIM compression brought about by rate cuts, lower fee income, and higher provisions against higher NPLs, noted Rungsrithanano.

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