Thai banks' earnings sink 19% YoY to $1.26b

They expect to recover earnings and ROE in 2018.

Big Thai banks reported a combined net profit of $1.26b (Bt39.6b) in 4Q17, declining 19% YoY, according to UOB Kay Hian. This fall was due to the significantly higher provisions for strengthening balance sheet quality to prepare for the upcoming change in accounting (IFRS 9).

Here's more from UOB Kay Hian:

Big banks’ 4Q17 earnings were mostly disappointing due to significantly higher provisions. The sector’s top-line growth remained broadly slow, but fee income surprised on the upside and operating expenses were largely well managed. NPLs continued to rise but there was no negative surprise.

Factoring in 2017’s numbers and banks’ guidance on 2017 financial targets, we have slightly fine-tuned our base-line assumptions for 2018. Loan growth is forecast to recover to 5.9%. With relatively stable interest rate and rising loan demand, NIM is forecast to stay firm at 3.2%. Provisioning costs are expected to notably ease to 135bp.

The sector’s provisions, in our view, have peaked and look set to ease going forward. 2018 is expected to be the beginning of an earnings and ROE recovery.