With oil prices expected to reduce consumption and lending growth, the aggregate profit growth was cut to 1.7 per cent from 3.5 per cent. The securities company also revised downward its SET index target to 834 points from 860 points.

"High oil prices could benefit energy stocks which contribute largely to calculating the SET index, but the higher prices will cause worries among consumers. Consumption could drop and new investment could be delayed. This will affect banks' lending," said Kavee Chukitkasem, senior vice president and head of the research division at CNS.

Oil prices are also expected to raise the operating costs of several companies. Yesterday, Bualuang Securities predicted that Siam Cement Plc, the country's biggest industrial conglomerate, would post a 22 per cent year-on-year drop in net profit to Bt7.8 billion in the first quarter.

The average prediction of four brokerage houses polled by Dow Jones Newswires put Siam Cement's first-quarter net profit at Bt7.9 billion, with estimates ranging from Bt7.8 billion to Bt8.08 billion.

The average earnings forecast represents a 22-per-cent fall from Bt10 billion a year ago and a 53-per-cent rise from Bt5.1 billion in the previous quarter.

Analysts told Dow Jones that soaring oil prices in the first quarter significantly raised energy costs for Siam Cement's cement and paper divisions.

The upward interest-rate cycle also ate into Siam Industrial Credit Plc's first quarter profit. In the quarter, the company's unaudited net profit was Bt111.6 million, compared to Bt133.6 million in the same period last year, according to the company's filing to the Stock Exchange of Thailand.

While its non-consolidated borrowing costs rose 69 per cent year on year to Bt285.9 million, its interest and dividend income rose 12 per cent to Bt476 million.

Bangkok Bank's net profit reached Bt5.18 billion, up by Bt1.27 billion from the same period last year. Despite the higher quarterly profit, the bank saw its interest expenses jump 22.5 per cent - or Bt1 billion - to Bt5.47 billion. Interest income rose only 5.5 per cent, or Bt869 million, to Bt16.67 billion.

Thanachart Capital showed an 8.9-per-cent increase in first quarter net profit to Bt748 million, due mainly to its expanding auto-loan business.

However the quarterly net profit of its subsidiary, Thanachart Bank, dropped 68.1 per cent to Bt50.4 million. Suphadej Poonpipat, president of Thachart Capital, attributed the sharp decrease to the transfer of Thanachart Capital's auto loan business to the bank, forcing the bank to include all of the expenses in its results.

Standard Chartered Bank (Thai) however showed a strong increase in its quarterly net profit, to Bt1.31 billion from Bt211 million last year's first quarter. "The underlying business momentum is strong. We will continue to see profitable growth from existing and new business opportunities, maximising productivity, outdoing the competition and providing the best-in-class products for our customers" said Mee Har Foo, chief executive fo Standard Chartered.

Still, CNS recommended investors avoid investing in banks, the 2006 performance of which will likely decline because they will not be able to lend as much as planned.

In addition, the mega-projects, which have been postponed, have apparently slowed banks' lending growth in the first quarter to only 1-2 per cent, much slower than the earlier projection of 6 per cent.

In addition, banks' net-interest margins will decline further due to higher funding costs and rising deposit rates.