"The performance of the Thai banks continues to show resilience with most reporting stable net profit helped by lower provisions and loan growth. Despite the weak operating environment there has been no significant asset quality deterioration. Thai banks' strong capital and liquidity, as well as the healthier state of the local consumer and corporate sectors have helped provide a strong buffer to the economic shocks in the past year," said Vincent Milton, Managing Director of Fitch Ratings (Thailand) and a Senior Director of Financial Institutions.
The system's profitability measures remained strong, helped by a pick up in loan growth (up 5.3% yoy) in Q210. The three largest private banks, BBL, KBANK and SCB, continued to outperform the sector with strong net profit and return on assets (ROA) in Q210. SCB reported the strongest annualised ROA of 1.7% in Q210, although its net profit declined by 16.7% qoq to THB5.3bn on the absence of dividend income from Vayupak Fund and lower gains on exchange. BBL's net profit of THB6.9bn (up 13.1% qoq), was boosted by a gain on the sale of BBL's stake in ACL Bank Public Company Limited to Industrial and Commercial Bank of China. KBANK reported net profit of THB5.2bn (up 12.2% qoq) due to stronger loan and fee income growth.
KTB's net profit increased by 9.7% qoq to THB3.4bn. BAY's net profit of THB2.1bn in Q210 was relatively flat qoq following a strong growth in Q110 due to asset acquisitions in 2009. TMB's performance is improving with a net profit of THB0.9bn (up 24.9% qoq), although revenue growth remains weak due to further loan contraction. SCIB's net profit increased 14.9% qoq to THB1.2bn, due mainly to lower provisions, while Thanachart Bank Public Company Limited's (TBANK, 'A(tha)'/RWP) net profit should increase significantly following the acquisition of SCIB. Thai banks' net interest margin (NIM; major seven banks) of 3.4% appears slightly higher than Malaysia (3%), but lower than Indonesia (6%) and the Philippines (4%). Thai banks' NIM does not take into account deposit protection agency cost (0.4% of deposits), which would lower NIM to 3%. Also, Fitch notes that Thai banks still face a higher burden from legacy NPLs from the 1997 financial crisis.
Thai banks' asset quality remained stable at end-June 2010. The system's NPLs (unconsolidated), declined by THB15bn qoq to 4.4% of total loans at end-June 2010 (end-March 2010: 4.6%). The system's special mention loans (SMLs) appeared to also have stabilised at about 3% of total loans. Of the major banks, KBANK reported the lowest NPL ratio (end-June 2010: 3.6%). TMB reported the highest NPL and SML loans, although the former fell to THB44.0bn (12.6% of total loans) at end-June 2010 from THB54.4bn (14.8% of total loans) at end-2009, mainly due to NPL disposal of THB9.3bn. BAY is also in the process of selling THB5bn of NPL in Q310, which is expected to help lower the bank's NPL ratio to about 6.5% by end-2010.
Disclosure: Kasikorn Asset Management Company Limited (of which KBANK holds a 100% stake) owns 10% of the shares in Fitch Ratings (Thailand) Limited. Muang Thai Life Assurance Company Limited (of which KBANK holds a 38.3% economic interest) owns 10% of the shares in Fitch Ratings (Thailand) Limited. TISCO Asset Management Company Limited (of which TISCO Financial Group Public Company Limited holds 100%) owns 10% of the shares in Fitch Ratings (Thailand) Limited. No shareholder, other than Fitch Ratings Limited of the UK, is involved in the day-to-day operations of, or credit rating reviews undertaken by Fitch Ratings (Thailand) Limited.
Applicable Criteria available on Fitch's website at www.fitchratings.com: "Global Financial Institutions Rating Criteria" dated December 29, 2009; and "National Ratings - Methodology Update" dated December 18, 2006.
Contacts: Patchara Sarayudh, Narumol Charnchanavivat, Vincent Milton, Bangkok, +662 655 4755