Thai banks' earnings expected to fall 3%

Blame it on lower margins and high provisions.

Maybank Kim Eng analysts expect the nine banks under their coverage to report a 3% QoQ decline in aggregate net profit for 2Q17 due to lower margins and high provisions (especially big banks).

"The market’s focus will be on the impact from the lending rate cut in May and the NPLs of big banks, especially those with exposure to EARTH."

Here's more from Maybank Kim Eng:

The market’s attention will turn to two issues. First, to what extent the commercial banks’ lending rate cut in May will affect their interest margins. With soft loan growth, non-interest income may have remained weak overall (expect +0.5% QoQ).

Second, after disappointing NPL numbers reported for 1Q17, the market should remain focused on this issue. Unfortunately, we expect KTB/KBANK/BAY to classify THB17b of EARTH loans as NPLs in 2Q17, driving the sector NPLs up to 3.78% (+12bps from 1Q17).