The majority of banking equities were in the red yesterday, with three of the top four banks by total assets seeing big sell-offs as investors were irked by lacklustre first-quarter results and an uptick in bad loans.
Shares of Kasikornbank (KBank), the country’s largest financial institution by total assets, plummeted the most by 7% to close at 90.25 baht per share from 97 baht.
Bangkok Bank (BBL) shares added to the misery, tumbling by 6% to 104.50 baht, with shares of Siam Commercial Bank (SCB) falling 4% to end the day at 67 baht.
Banking equities are the top losing sector on the Stock Exchange of Thailand index on a year-to-date basis as of April 21 as the sector has dipped by 35%. Ten out of 11 SET-listed banking equities saw losses of up to 36% year-to-date, with CIMB Thai Bank (CIMBT) being the sole gainer of 2%.
Among the top four banks by total assets, KBank saw unaudited consolidated net profit fell by 34.5% from a year earlier to 6.58 billion baht for the January-to-March quarter, mainly due to higher loan impairment charges and other operating expenses and a sharp decline in non-interest income.
Net interest income for the country’s largest lender by assets surged by 11.2% from a year earlier to 28.1 billion baht in the first three months, while non-interest income plunged by 39.8% to 7.37 billion baht in the same period, mainly due to volatility in the money and capital markets during the recession from the pandemic, plus TFRS9 impacts from reclassification and new measurements for investments that reflect non-interest income.
Thai banks started to adopt TFRS9, a new accounting standard requiring them to put aside provisions based on expected credit loss at the beginning of this year.
KBank’s gross non-performing loans (NPLs) to total loans at the end of March stood at 3.86%, up from 3.65% at year-end 2019.
KBank’s asset quality warrants concern because 400 million baht worth of loans, or 20% of total loans, are associated with customers operating in the tourism segment, said Maybank Kim Eng Securities Thailand (MBKEST).
Net interest income and net interest margin are poised to reduce this quarter as the bank has lowered its loan rates by 40 basis points from April 10, said MBKEST.
Generally, banks’ first-quarter results were better than expected because they were yet to see the full impact of the Covid-19 outbreak, while NPLs did not reflect the real state of the economy due to the government’s relief package, said Finansia Syrus Securities (FSS).