THE FIRST-HALF net profit of all 11 listed banks increased by a slight 1.125 per cent to Bt103.3 billion from a year earlier on tapering loan growth and rising bad debt, particularly in hire-purchase lending.
In the first half of last year, some banks booked gains from extraordinary items, which fattened their bottom lines. Although some banks have logged one-off profits this year, they were not enough to offset the slack in credit demand and build-up in bad loans from the prolonged political unrest.
However, many bankers say they expect that the economic recovery resulting from the return of political stability and increased business and consumer confidence will lead to rising loan demand and an improvement in the rate of bad loans during the remainder of 2014.
Siam Commercial Bank, Kasikornbank and Bangkok Bank were able to maintain their record of showing first-half net profits, but among the top four banks, Bangkok Bank was the only one to witness a net-profit drop of 6.6 per cent to Bt17.99 billion.
This was predominantly because of a one-time reversal of the probable loss arising from the impaired assets transferred to the Thai Asset Management Corporation (TAMC) during the first half of 2013 and a decrease of B1 billion in gains on investment during the first half of 2014.
An increase in operating expenses from branch expansion and investment in operations improvement as well as a rising cost-to-income ratio ate into the profits of BBL even though its loans rose 0.7 per cent year on year.
Its non-performing-loan (NPL) ratio to outstanding loans climbed to 2.3 per cent from 2.2 per cent as of the end of last year.
SCB, which reported a loan drop of 0.2 per cent, saw its first-half net profit surge 8.31 per cent to Bt27.9 billion on a gain from the sale its non-life insurance company.
Kasikornbank reported the highest growth in first-half earnings among the top four banks at 12.3 per cent to Bt23.67 billion. KBank expanded its loans by 2.3 per cent and maintained its NPL ratio at 2.1 per cent.
Krungthai Bank’s first-half net profit increased 4.7 per cent to Bt15.84 billion, as its loan growth was the highest among the top four at 5.8 per cent, but its NPL ratio jumped to 2.91 per cent from 2.6 per cent mainly because of delinquencies from small-business and retail customers.
TMB Bank became the top performer by pumping up its loans by 102.4 per cent to Bt4.17 billion thanks to a decline in provisions for doubtful debt and a one-time excess reserve write-back from successful NPL sales and problem-loan resolution.
Bank players in the hire-purchase (lease to own) business were unable to improve loan growth and NPLs as the political turmoil stretching from the fourth quarter of last year to early in the second quarter of this year continued to dampen demand for loans for new cars. They also suffered losses on vehicle repossession.
Thanachart Capital, the holding company for Thanachart Bank, the biggest provider of auto loans, showed the poorest performance. Its net profit plunged by 57.6 per cent to Bt2.55 billion from the high base in the corresponding half of last year, when TCAP booked an extraordinary gain from selling a life-insurance company.
In its core business, loans slipped 0.1 per cent in line with the sluggishness in auto sales and NPLs rose to 4.6 per cent from 4.5 per cent.
Tisco Financial Group, the holding company of Tisco Bank, reported a first-six-month net-profit drop of 16.9 per cent to Bt1.92 billion. Lending decelerated 4.6 per cent and NPLs accelerated to 2.3 per cent from 1.7 per cent.
Tisco’s loans this year are expected to decline by 2-3 per cent as the bank wants to spend time looking after credit quality, according to its executives.
Bank of Ayudhya, the major player in consumer finance, reported first-half net profit slumping 4.7 per cent to Bt6.8 billion, largely driven by the bad-debt recovery from Dubai World Group Finance of Bt550 million and the reversal of Bt1.08 billion in reserves taken for TAMC in the first half of last year.
Krungsri has maintained its loan-growth target of 7-9 per cent for the full year despite the downtrend in loans in the first half of 0.3 per cent and uptrend in NPLs to 2.92 per cent from 2.6 per cent.
CIMB Thai Bank reported impressive first-half net-profit growth of 14.8 per cent and loan growth of 4 per cent, but bad debt shot up to 3.1 per cent from 2.5 per cent as the economic slowdown had cramped the repayment ability of customers.
Some banks still expect to be able to report loan growth this year despite the flat performance in the first half. But analysts have lowered their forecasts for net earnings of banks in the hire-purchase sector to reflect the slow recovery in this category.