Analysts expect banks to report combined earnings of 61 billion baht in the second quarter, down 2% from three months earlier and flat from the corresponding period last year, due to lower interest rate income, slowing lending and interest rate cuts to help retail customers.
Big-cap banking stocks on the Stock Exchange of Thailand (SET) are set to report second-quarter financial results later this week, according to Asia Plus Securities' (ASPS) research department.
ASPS anticipates eight banks under its coverage will report a total net profit of 61 billion baht, down 2% quarter-on-quarter and flat year-on-year, on weak net interest income (NII) as loans declined, and higher financial costs (repricing of fixed deposits).
Large commercial banks temporarily lowered their interest rates as a form of assistance for vulnerable groups.
Credit cost is expected to remain unchanged quarter-on-quarter but up year-on-year since the economy has not recovered from the first quarter yet.
Non-performing loans (NPLs) are expected to reach 3.7% in the second quarter, up from 3.6% in the first quarter and 3.5% at end of 2023. Coverage ratio is projected to drop to 176% from 179% in the first quarter due to asset quality management through NPL sales and write-offs.
"This reflects that Thailand's economy is vulnerable now," ASPS said in a research note.
Last week, Tisco Financial Group (Tisco) became the first bank to report its financial performance. Although its net profit was in line with expectations, the NPL ratio was higher than forecast, due mainly to those concerning leasing and car title loans.
"Other banks have downside risk from credit costs and higher expected credit costs, especially after Tris Rating downgraded their credit ratings earlier this week," said the brokerage.
Overall, "the banking sector sentiment is dull, but valuation is still favourable," with an average price per book (PBV) of 0.8x and dividend yields over 5% per annum, it added.
TMBThanachart Bank (TTB) benefits from the tax shield. Kasikornbank's (KBank) credit cost is expected at 1.9% in the second quarter, versus 1.9% in the first quarter and 2.1% a year earlier.
As a result, TTB and KBank are projected to show stronger second-quarter net profit growth year-on-year than their peers.
As well as KBank and TTB, Bangkok Bank is also expected to outperform the overall banking group. The outlook for Krungthai Bank and Siam Commercial Bank is neutral, said ASPS.