CAUTIOUS APPROACH

Loan-loss provisions weigh on big players

Local commercial banks posted a slight decline in second-quarter profit as big players set aside greater loan-loss provisions.

Local commercial banks posted a slight decline in net profits for the second quarter of the year as a result of higher loan-loss provisions by big players.

The SET-listed banks announced a combined net profit for the second quarter of 52 billion baht on consolidated financial statements, a decrease of 1.63% year-on-year.

Higher provisions for loan loss of the big four players pressured profitability in the Thai banking industry, despite the fact that they have shown positive operating profits, with both better interest and noninterest income.

Among the country’s four largest banks — Bangkok Bank (BBL), Krungthai Bank (KTB), Siam Commercial Bank (SCB) and Kasikornbank (KBank) — KTB is only one booking a higher net profit at 8.68 billion baht, a 2.72% increase year-on-year.

KTB said in a statement, however, that the bank’s non-performing loans (NPLs) had continued to increase since the end 2015 due to the hard times endured by its corporate and SME clients as well as the struggling retail sector.

For the first half of 2016, the bank’s provision for bad debts totalled 16.4 billion baht, a rise of 45.6% year-on-year. Its gross NPL ratio jumped from 3.09% at the end of last year to 3.79% as of June this year.

BBL, Thailand’s largest commercial bank, has also maintained prudent risk management by setting aside appropriate provisioning expenses, resulting in 112 billion baht in total allowances for doubtful accounts at the end of June 2016 — a ratio of loan loss reserves to total loans of nearly 6%.

In the second quarter of 2016, BBL’s provisioning expenses amounted to 3.5 billion baht.

Meanwhile, SCB set aside loan loss provisions in the second quarter this year of 8.51 billion or 1.84% of total loans, a 66% increase year-on-year. With an eye towards risk management, it increased its coverage ratio to 130% in the second quarter this year from 122% in the previous quarter and 109.8% at the end of last year.

The industry’s fifth biggest lender, Bank of Ayudhya (Krungsri), showed a stronger net profit for the second quarter at 5.27 billion baht, an increase of 21% year-on-year.

The bank has successfully kept its gross NPL proportion steady at 1.59% as of June this year, compared with 1.6% at the end of last year.