The securities house believes the bank's 2006 net profit will fall from an earlier estimate of Bt1.875 billion to Bt1.598 billion because of rising funding costs.

"We also cut our 2007 earnings estimate by 12.7 per cent to Bt1.82 billion on slower loans growth of 10 per cent against the estimated 13 per cent and lower net interest margin assumption of 3.7 per cent against the estimated 4 per cent.

"Rising competition from commercial houses Siam Commercial Bank and Kasikornbank, which have a significant funding-cost advantage, are the key factors for our cut in the earnings forecast," the securities house said in a statement.

In the first nine months of the year, Tisco reported a net profit of Bt1.22 billion, which accounts for 65 per cent of its original full-year projection.

UOB said in its report released last week that while loan growth had gained momentum the bank's net interest income was likely to fall on a further drop in net interest margins.

In the third quarter the bank's net interest margins dropped 29 basis points quarter on quarter to 3.5 per cent because of a 58-basis-point increase in average funding cost and a 36-basis-point increase in loan yields.

As a result net interest income fell 5.4 per cent quarter on quarter to Bt663 million.