Thai banks' total net profit pegged to jump 25%

Here's what will drive loan demand.

According to Maybank Kim Eng, Thai banks' 3Q13F earnings remained healthy, showing continuous growth. Maybank expects total net profit to rise by 25% in 2013F and by 17% in 2014F. Infrastructure investment projects will be key growth driver for loan demand.

Here's more:

Although share prices have rebounded, the current valuations remain attractive for long-term investment. 3Q13 results remains good. The aggregated 3Q13 net profit for Thai banks' was up 1% QoQ and 16% YoY to THB50.5b.

Most banks reported earnings in line with estimates. Among the others, BAY and KKP disappointed the market while TCAP beat the consensus.

KTB was the only bank which posted a record new high. Overall, loans continued expanding, with the slightly increased NIM. Therefore, netinterest-income then increased significantly both QoQ and YoY.

Non-NII was mixed (good for some banks and bad for few), while cost-toincome ratio stayed low. Asset quality showed signs of improvement, especially for hire-purchase banks where NPLs increased at a significantly slower pace. Credit costs dipped by 35% QoQ after extra provisions were set aside in 2Q13 for some banks.

Expect 17% earnings growth for 2014F. For 4Q13F, we expect loan and fee income to increase due to seasonal effects, but earnings could be hit from a seasonally rising Opex and extra provisions for some banks. Overall, we project a 25% net profit growth for 2013F.

We expect the economy to return to normal next year (4.5% GDP growth for 2014F). Both public and private investments will be key economic drivers with a THB2t loans bill as a trigger point. We also except exports to recover along with the global economy. We forecast a 17% net profit growth for 2014F, thanks to loan and Non-NII growth.

Regarding the concerns for NPLs, we still believe that asset quality remain healthy, while the large provisions set aside this year will help strengthening banks’ balance sheets. We expect declining credit costs will be a key support for 2014F earnings growth.

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