Brokers and lenders cautious

Middle East tensions and the overall global economy affect consumer lending and willingness to risk buying shares

The performance of finance and securities companies improved significantly on the back of an improving economy and stock market, but uncertainty caused by external factors could be a drag on sustained growth in the second half.

Worries of the US slowdown and rising tension in the Middle East have been hurting stock markets around the world including Thailand.

Analysts said securities companies were expected to see a direct impact. Daily trading turnover would shrink as foreign investors shift money into bonds and this would result in a reduction of brokerage commissions, the major revenue source of securities firms.

Currently, the SET's average trading turnover is 11 billion baht per day, up from 6.41 billion baht last year. But the market has sen a notable decline in average turnover in the past six weeks.

On the other hand, finance firms are in a better position because they have a cushion from the high growth of hire-purchase loans. Car sales, already up 36% in the first half, are expected to continue rising in the second half.

``[Finance firms] should continue their growth momentum in the second half because of wider interest spreads, an increase in investment portfolios and expansion of the hire-purchase business,'' said one analyst.

Thirteen listed firms in the finance and securities sector posted a combined net profit of 3.46 billion baht during the first half, a 144% jump from 1.42 billion baht the whole last year.

The only five securities firms posted a combined net profit of 531 million baht during the first half, compared with losses of 37 million in the same period last year, due mainly to a rise in brokerage fees since the return of the fixed 0.25% commission rate on Jan 4.

Among the 19 firms in the sector, Seamico Securities outperformed with the highest return on investment at 151.6% over one year, followed by Siam Industrial Credit (Sicco) 134.5% and Adkinson Securities 105%.

At the bottom of table were Scandinavian Leasing at -17.6%, Siam General at -8.6% and Book Club at -2%.

Reungwit Dusadeesurapoj, chief executive of Seamico, said the firm realised higher revenues from higher brokerage fees while its overheads were reduced.

As well, the company has actively widened its investor base, increasing its share to 8.1% from 6.5% of average daily SET turnover. Seamico plans to open two new branches soon, giving it seven outlets in all.

Charnchai Kultavarakorn, president of Adkinson, said his company had high growth potential because it had acquired IB Securities, which would seek a listing on the SET in the next 18 months.

``The acquisition of IB Securities will help fill the gap caused by the absence of an underwriting licence and create more activities for Adkinson in the future,'' he said. ``Shares of Adkinson have gained more than 100% from last year, reflecting the fair value of the company. Our current price is 13 baht each and this excludes the value of IB Securities.''

Wichet Warakul, senior executive vice-president of Sicco, said the finance business was driving the company's growth. About 80% of its revenue came from finance operations and the rest from Sicco Securities, the brokerage it plans to float to the public next month.

Sicco has a 7% share of the total hire-purchase market. Its return on equity is 12-15% per year and dividend payments are 15-20% of net profits per year. The firm would expand its lending portfolio by 20-25%, from outstanding loans of 14 billion baht at present.

Analysts said most leasing companies had lower profit margins when compared with finance companies in the car hire-purchase business, due mainly to higher financial costs._Nuntawun Polkuamdee

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