SET-listed commercial banks' net profits will drop by 42.2% to 32.5-33.5 billion baht in the third quarter of 2021, compared to the second quarter of the year with a net profit of 57.2 billion baht due to the pandemic, said Kasikorn Research Center (K-Research).
The flare-up of the outbreak in the third quarter caused the banks' revenues from their core businesses to decline, especially non-interest income from service fees that is likely to shrink by 6.5-9.0% from the same period last year.
K-Research noted that the proportion of non-performing loans (NPLs) in the banking system may rise to 3.10-3.17% of total loans in the third quarter, although the Bank of Thailand has relaxed the rules to increase flexibility of debtor classification criteria.
Commercial banks are expected to be able to record better operating results than the same period last year in the third quarter.
The banks' biggest challenge next year is how to address the problem of increasing NPLs and cope with rising competition in the financial and credit market caused by the participation of more players both from the bank and non-bank sector and fintech and techfin groups.
The revaluation of investments in commercial banks' financial instruments is likely to be pressured by the rising government bond yields. The banks are also unlikely to record a large amount of extra income from any other assets.
Meanwhile, commercial banks' interest income in the third quarter is expected to slightly drop from the previous quarter because the banks currently need to be more cautious when issuing new credit. The issuance of retail loans also decelerated in line with the household sector's weakening financial capacity.
However, the industry's overall loan portfolio is likely to pick up quarter-on-quarter and year-on-year following the continuous growth in corporate loans, especially those issued to large businesses. In addition, financial institutions reportedly have issued more credit to business operators through loan rehabilitation projects.
K-Research expected loans issued by commercial banks will grow by 4.7-5.2% in the third quarter, but the net interest margin may drop to a range of 2.50-2.55%, compared to 2.56% in the second quarter.
The amount of debt this year has increased from 3.18 trillion baht from 4.77 million accounts receivable in April to 3.35 trillion baht from 5.12 million accounts receivable in July.
Over 60% of those accounts are debtors receiving assistance provided by commercial banks to ease the burden on customers during the pandemic.
Consequently, commercial banks are likely to prepare guidelines to solve problems and adjust their models to generate long-term income after the pandemic is over, such as using databases to increase business opportunities in high-yield markets and increase the market share in online channels and digital platforms.