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Banks' bottomlines hit as demand for loans and fee incomes take a hit

Ten commercial banks reported a combined net profit of Bt42.5 billion, a 1.16-per-cent decline from Bt43 billion in the same quarter last year, as most banks experienced contraction in loans as well as weaker non-interest incomes besides high loan-loss provisions.

Siam Commercial Bank reported the highest net profit among peers of Bt13.12 billion, but it was flat growth year on year while its loan growth was also flat.

Kasikornbank was the only major bank that could continue its net profit growth in the first quarter with Bt11.94 billion, an 18.14-per-cent increase year on year. Its loan growth in the first three months expanded only 0.79 per cent, but the bank could maintain a healthy growth in non-interest income from money market and capital market products as well as net premiums earned.

Kiatnakin Bank reported the highest loan growth in the banking industry at 3.6 per cent in the first quarter, but its net profit saw the biggest drop of 39.63 per cent to Bt700.23 million.

The plunge in net profit was mainly due to a decrease of 19.7 per cent in net fee and service income in the capital market business.

Bangkok Bank, the country's largest bank by assets, earned net profit of Bt8.99 billion, a 0.6-per-cent decline from Bt9.01 billion, due mainly to a drop in loan demand of 0.4 per cent from the end of last year. The bank cited the economic slowdown had some impact on demand for loans, especially lending for business expansion. A major portfolio at Bangkok Bank is corporate loans.

In line with its prudent management and consistent provisioning policy, the bank set aside provisioning expenses of Bt2.1 billion for the first quarter of 2014 and consequently the loan loss reserves to NPLs ratio stood at 210.1 per cent.

Bank of Ayudhya, the country's fifth bank by assets, reported a decrease of 18.8 per cent in net profit to Bt3.26 billion and loan growth expanded by 0.4 per cent compared to December 2013.

Net fees and service income grew slightly by 2.5 per cent from the first quarter last year due to a weaker loan-related, auto hire purchase and card-related fees.

Thanyalak Vacharachaisurapol, head of money and banking at Kasikorn Research Centre, said that a contraction in loans in the first quarter is a clear sign that the ongoing political unrest has critically hit the banking industry.

The research maintained its forecast of 6-per-cent loan growth for the banking industry with total net loans of Bt600 billion, the lowest figure in five years.

The weaker loan is in line with the economic slowdown, which is according to analysts' consensus, but the reduction in fee incomes, especially bancassurance and mutual funds of several banks, reflected that the political trouble had also hit investment sentiment, she said.

TMB Bank is among banks that reported a significant weakening of non-interest income, mainly from the drop in mutual fund and bancassurance fees.

Tisco Financial Group's non-interest income plunged 17.2 per cent year on year due mainly to reduction in brokerage fee income following the decrease in average market trade volumes. The group remains set for a high provision of Bt1.2 billion in the first quarter.

The economist said that the softening of banking net profits in the first quarter was due to the proactive provision policy. Banks, in general, will set a normal provision in the first quarter after setting a high provision in the fourth quarter of the previous year. The high provision has pressured the bottom lines of banks and also reflected that banks have taken a more impairment stance in light of possible negative change in the remainder quarters of this year.


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