Net profits dip as loan buffers spike
Thailand's commercial banking sector reported a drop in aggregate net profit for both the second quarter and first six months, mainly from higher provisions set aside to cushion against rising non-performing loans (NPLs).
Combined net profit was logged at 30.4 billion baht in the second quarter, down 41% year-on-year from 51.6 billion year-on-year. First-half combined net profit was recorded at 77.2 billion baht, down 27% year-on-year from 106 billion registered in the first half of 2019.
The profit decline was largely led by the country's four largest banks by total assets, Kasikornbank (KBank), Bangkok Bank (BBL), Krungthai Bank (KTB) and Siam Commercial Bank (SCB), along with the dampening performance of the overall banking industry.
The Bank of Thailand's new financial standard of expected credit loss under Thai Financial Reporting Standards 9 also put pressure on banks to beef up loan-loss provisions.
KBank, the country's largest lender by total assets, booked the highest rate of net profit reduction, falling by 78.9% and 52.2% year-on-year for the second quarter and first half, respectively.
SCB, the fourth biggest bank, logged the industry's highest net profit amount for both periods of 8.36 billion baht and 17.6 billion, respectively. However, the bank's second-quarter and first-half net profits dropped by 23.8% and 12.5% year-on-year.
Only two banks, TMB-Thanachart Bank (TMB-TBank) and CIMB Thai Bank (CIMBT), announced a net profit increase for both periods.
The merged-bank, TMB-TBank, showed strong growth of 61.4% year-on-year for the second quarter and 108% for the first half, mainly supported by financial consolidation of the merger deal.
LH Financial Group saw the biggest NPL uptick to 3.1% of total outstanding loans as of June, up from 1.85% logged at year-end 2019.
Meanwhile, SCB, CIMBT, and Kiatnakin Bank reported lower gross NPL ratios during the first six months compared with year-end 2019.