Among large-sized banks, Kasikornbank showed the highest growth in the business during the first quarter, chalking up a 110.92-per-cent increase year on year. The country's fourth-biggest bank made a Bt609.79-million profit on foreign exchange in the first quarter, up from Bt289.10 million in the same period last year. Its first-quarter profit was also a jump of 45.37 per cent from Bt419.48 million gained from foreign-exchange business in last year's fourth quarter.

Bangkok Bank recorded the highest amount of profit from its first-quarter foreign-exchange business, Bt1.1 billion, up 44.21 per cent from the Bt762.77 million made in last year's first quarter. The country's biggest bank also recorded a 20.92-per-cent increase in gains on foreign exchange between last year's fourth quarter and this year's first quarter.

Bank of Ayudhya's first-quarter profit from foreign exchange was Bt324.84 million, up 91.95 per cent from the Bt169.23 million made in last year's first quarter.

Siam Commercial Bank recorded a first-quarter profit from foreign exchange of Bt769.96 million, up 15.39 per cent from the Bt667.25 million recorded in the same period last year. Its first-quarter gains were also up 16.1 per cent quarter on quarter.

TMB Bank posted a first-quarter gain from exchange of Bt335 million, 112 per cent higher than the Bt158 million recorded in last year's first quarter. Its first-quarter profit from exchange grew 37.86 per cent from the Bt243 million made in last year's fourth quarter.

Krung Thai Bank was the odd man out. Its Bt310.44-million first-quarter profit on foreign exchange was 3.95 per cent lower than the Bt323.22 million made in last year's first quarter. TMB said in a statement to the Stock Exchange of Thailand that its growth in foreign-exchange business was due mainly to exchange-rate volatility, expansion of its foreign-exchange booths and its active treasury operations.

A local banking dealer said the banks' gain on foreign-exchange business increased significantly in the first quarter, partly because of an extraordinary item. The central bank's 30-per-cent withholding measure has led to distorted market prices and in particular to a substantial disparity in the value of the baht in onshore and offshore markets. This has led to gains from foreign exchange.

He said the baht's volatility during the first quarter had resulted in higher currency-market activity and greater trading volumes in treasury business from both banks and their customers. This followed the growth rate in the country's imports and exports.

"It's possible that gains from exchange came partly from speculation in the baht, but that's normal business practice when foreign-exchange rates are volatile. The banks' foreign-exchange profits in the first quarter are unlikely to have come mainly from baht speculation," the dealer said.

Kasikorn Securities assistant managing director Kavee Chukitkasem said the banks' first-quarter gains from foreign exchange possibly came mainly from fee income from foreign-exchange risk-management services. The  volatile baht has provided an opportunity for banks to provide hedging services to customers, particularly in the import and export sectors.

The profit was probably from banks' foreign-currency trading, while gains from baht speculation would probably have been small, because that activity is controlled by the central bank, he said.

Somruedi Banchongduang

The Nation