Noting that he stock market had risen 38.5 per cent last month, the brokerage said it expected the performance of listed companies to record a rise during the first quarter of this year, especially in the electronics, automotive and agricultural sectors.

Siam City Securities (SCIS) remained bullish about the banking sector even though it estimated the sector would post an average 7-per-cent drop in net profit during the first quarter on year.

It attributed the decline to tax payment by big banks. SCIS said the estimated average of 59 per cent on-quarter earnings growth in the first quarter of this year was a normal result of the loan-loss reserve allocation set by many banks, especially during the fourth quarter of each year.

It also said competition in the banking sector had been intense as many banks launched a series of products to maintain their customer bases. SCIS believed that eventually the competitive battle for the interest rates on fixed-deposit accounts would lead to a rise in interest rates on savings accounts. As a result, SCIS estimated, only Kasikornbank (Kbank), Siam Commercial Bank (SCB) and Krung Thai Bank (KTB) will remain in a position to maintain the net interest margin (NIM).

SCIS estimated that Kbank would in the first quarter post 29-per-cent growth on quarter as it had set aside a loan-loss reserve 4.56 times higher than in the first quarter of 2005.

This apart, it said, the 25-per-cent increase in business-administration expenses in the K-Transformation and Channel expansion projects will cause the bank's year-on-year performance to fall 9 per cent.

As a result, SCIS forecast Kbank may not post significant growth this year, though its plan will have a positive effect in the long run by improving its competitiveness in the sector, and its NIM having remained high, it will benefit from the growth of cross-selling fees. SCIS recommended investors "buy" Kbank at Bt74.6 a share.

It recommended investors "hold" SCB stock for the dividend at Bt64.61 a share, as although first-quarter net profit might drop 9 per cent on year, its investment in business expansion had been completed.

SCIS estimated KTB would post 428-per-cent earnings growth in the first quarter of this year compared to the previous quarter due to lower loan-loss reserve allocation. It set an appropriate price of Bt13.1 per share.

SCIS recommended investors "sell" Bank of Ayudhya as it expected the bank's earnings to grow only 24 per cent in the first quarter compared to the previous quarter. It gave an appropriate price of Bt17.37 a share.

It recommended investors "hold" TMB Bank stock at Bt4.25 a share, estimating that TMB would post 331-per-cent growth on quarter though it had grown only 1.5 per cent on year.

SCIS estimated that this year the banking sector would post 8.5-per-cent loan growth, most generated by exports, mortgages and SMEs, though if the political situation remained unsolved and affected the overall economy, loan growth would drop to 7.5-8 per cent.

Siriporn Chanjindamanee

The Nation