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Published on October 5, 2007

The third-quarter earnings of banks will fall because of the drop in new lending, with TMB Bank turning in the worst performance due to rising bad loans this year, brokerages said yesterday. BT Securities said the combined net profits of the seven large banks it covers would plummet 30.1 per cent year on year to Bt15.16 billion on lower lending.

The baht's appreciation also dampened exports, particularly of textiles and garments, the securities house said. The provisioning burden for investments in collaterised debt obligations at BankThai, Krung Thai Bank, Bank of Ayudhya and Bangkok Bank will also hit net profit.

Operating profit for these seven banks will rise 0.7 per cent to Bt31.06 billion, as their net interest margin remains high, due to the steady decline in deposit interest rates and the low loan interest rates from early this year.

Asia Plus Securities estimates the earnings of the eight banks it covers will slip 43.4 per cent to Bt11.56 billion from Bt20.41 billion in the same quarter last year. However, earnings will grow from the second quarter as loan-loss provisions dropped sharply.

BT Securities expects TMB Bank to post a net loss of Bt3.15 billion, down by 345.5 per cent year on year, as the only bank out of the seven to see red ink.

Paveena Dej-Ltikula, an analyst at BT Securities, said the main reason for the net loss of TMB Bank was its provisioning for doubtful loans as well as for the new International Accounting Standard 39.

The bank's operating profit is also expected to fall by 5 per cent from the second quarter on the narrowing of its net interest margin by one percentage point after its lending in the first seven months of this year declined by 8.68 per cent.

"We expect TMB to record a loss of about Bt30 billion for the entire year due to as much as Bt18 billion of provisions and Bt12 billion of goodwill amortisation," the company said.

A Tisco Securities analyst said banks' third-quarter earnings were expected to fall from last year due to higher operating costs and lack of extra income.

Siriporn Chanjindamanee

The Nation