This year's aggregate net profit of commercial banks registered in Thailand is estimated at 144 billion baht, a nine-year low, attributed mainly to the pandemic impact, says Kasikorn Research (K-Research).
The estimate uses the Thai Financial Reporting Standards 9 (TFRS 9).
The combined net profit of registered commercial banks was 254 billion baht in 2019, before TFRS 9 came into effect, according to K-Research.
It was reported in October that both the third-quarter and nine-month net profit of major SET-listed financial institutions saw a double-digit decline on a year-on-year basis as banks beefed up loan provisions to cushion against higher bad debt prospects.
For instance, Kasikornbank (KBank), the country's largest commercial lender by total assets, and its subsidiaries reported third-quarter net profit of 6.67 billion baht, down 32.9% year-on-year.
The bank's net profit for the first nine months was 16.2 billion baht, down 45.8% year-on-year.
Registered commercial banks' profitability in 2021 will mainly depend on risks associated with Covid-19 outbreak, said K-Research.
Under a scenario where GDP growth is 2.6% next year, aggregate net profit is expected to be 148-154 billion baht for commercial banks, growing in a range of 3-7% year-on-year, said the think tank.
Maintaining revenue growth for core businesses and managing distressed debts are the key challenges facing the banking sector in 2021, said K-Research.
Although the economy bottomed out in the second quarter of 2020, economic recovery is projected to be uneven throughout 2021, with first-half growth prospects pressured by a fresh round of Covid-19 outbreak in Thailand, said K-Research.
Under this scenario, commercial banks will face higher challenges to maintain interest and fee-based incomes.
Total loan growth of the commercial banking industry in 2021 is expected to be 3-4.5%, compared with 4.5% growth in 2020.
Next year's loan growth will derive mainly from additional liquidity and working capital for corporate customers, said the think tank.
Investors are expected to delay investments, especially in long-term investment projects.
Sluggish loan growth is likely for the retail and small and medium-sized enterprise segments because of existing financial burdens and the prolonged pandemic crisis.
Given a fragile recovery next year, K-Research forecasts the net interest margin of the commercial banking sector between 2.65% and 2.75%, compared with an estimated 2.75% for this year.
However, fee-based income is expected to contract by 1-3% in 2021.
K-Research predicts the non-performing loan ratio of the overall commercial banking industry will increase to 3.53% of total outstanding loans at year-end 2021, up from an estimated 3.35% at year-end 2020.