SCB, KBank post weaker earnings
Two of the big four commercial banks reported a sharp drop in unaudited consolidated net profit for 2017 and the three months to December, with larger bad-debt provisions taking a toll on balance sheets.
Siam Commercial Bank (SCB) and Kasikornbank (KBank) saw net profit dive in both the whole of 2017 and the final quarter, while the country’s largest lender, Bangkok Bank (BBL), showed improved earnings but also set aside higher impairment charges for credit losses. Krungthai Bank (KTB) is due to release its results on Monday.
The disappointing earnings of SCB and KTB extended the selling spree in heavily weighted banking stocks, even as the SET index closed 2% higher yesterday.
SCB shares closed at 153.50 baht, down 3.50 baht, in trade worth 4.9 billion baht. KBANK shares closed at 227 baht, unchanged, in trade worth 5.1 billion baht.
BBL closed at 212 baht, down one baht, in trade worth 1.4 billion baht. KTB shares closed at 20.40 baht, down 10 satang, in trade worth 896.4 million baht.
KBank, the country’s fourth-largest lender by assets, emerged as the worst performer among the three large banks to already release their earnings.
The bank’s net profit plunged 14.5% in 2017 to 34.3 billion baht, while fourth-quarter earnings slumped 44% year-on-year to 5.71 billion, according to a filing with the Stock Exchange of Thailand.
KBank’s impairment costs surged 68.9% on the same period a year ago to 11.6 billion baht during the October-to-December quarter. For the full year, loan-loss charges jumped 23.9% to 41.8 billion baht.
Coverage ratio soared to 148.5% last year from 130.9% in 2016.
KBank’s gross non-performing loan (NPL) ratio edged down to 3.30% at the end of last year from 3.32% at the end of 2016.
The bank’s higher interest, fee and service income failed to offset the sharp increase in loan-loss provision.
Interest income rose to 24 billion baht during the three months to December, compared with 23 billion a year earlier, and fee and service income advanced to 10.4 billion from 9.89 billion.
In 2017, KBank’s interest income rose by 5% to 94.2 billion baht, while fee and service income gained 6% to 41.3 billion.
SCB posted a net profit of 43 billion baht in 2017, down from 47.6 billion in 2016. During the October-to-December period, net profit fell by 27.7% year-on-year to 9.2 billion baht.
Higher prudent provisions were set aside to align with existing expected loss, compared with those required under the new accounting standard effective in 2019, and an 11.6% rise in operating expenses, mainly from the bank’s investment in digital banking technology to expand the customer base, SCB has said.
The bank set aside 7.49 billion baht worth of loan-loss reserves for the three months to December, soaring 275.7% year-on-year. For the whole year, impairment charges jumped 11.2% to 25.1 billion baht.
BBL’s net profit rose by 2.8% to 8.5 billion baht in the final quarter and increased by 3.8% to 33 billion for 2017.
The bank’s loan-loss provision surged by 28.4% yearon-year to 4.62 billion baht during the three months to December and 42.2% to 22.4 billion last year.
Consolidated bad loans soared by 27% to 87.4 billion baht, and gross NPL ratio rose to 3.9% at the end of 2017 from 3.2% in the previous year.
The lower net profit, particularly at large banks, could be attributed to the significant increase in loan-loss provision in the final quarter of last year to prepare for the new accounting standard, International Financial Reporting Standard Version 9 (IFRS9), said Asia Plus Securities vice-president Usanee Liurut, adding that the NPL situation showed signs of improvement.
Such aggressive provisions are a proactive practice to prepare for adoption of IFRS9 in January next year, Ms Usanee said.
“Regulatory risk was a key factor pressuring banks’ provisions and earnings in 2017, and the heavy impact was seen in the fourth quarter,” she said.
The industry’s additional provision requirement for 2018 is expected to decline and net profit will be improved, she said.
Unlike large banks, all small banks set aside lower loan-loss provisions last year, and nearly all delivered better net profits.
Take CIMB Thai Bank as an example. It swung back to a net profit of 385 million baht in 2017 from a net loss of 629.5 million baht in 2016, mainly due to improved operating income and lower loan-loss provision.