Thai bank profits to fall 1% in Q2

Thanachart Bank will get hit the hardest as earnings will fall 13%.

The net profit of Thailand's banking sector is expected to fall 1% as non-interest income remains weak and sluggish growth conditions curb profitability, according to UOB Kay Hian.

"Non-II to remain weak but pressure on fee income likely to ease. The only weak area was non-II as fee income will be dragged by the waiver of digital banking fees," Thananchai Jittanoon, analyst at UOB Kay Hian said in a report. "Overall, we forecast fee income to decline 4% YoY (but up 1.2% QoQ) in Q2 (Q1: -14% YoY)."

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Amongst the country's lenders, Thanachart Bank is likely to post the weakest earnings as net profit will fall 13% amidst higher staff costs. TMB is not expected to fare any better as net profit is also set to moderate 7% amidst weak non-II. On the other hand, TISCO will forecast the strongest net profit growth of 10% amidst lower provisions and Bangkok Bank earnings are likely to grow by a decent 8%. 

Loan growth is also set to slow to 4% in Q2 as housing loans cool further. As consumer finance weakens, corporate borrowing is expected to drive lending gains in the second half of the year in line with more economic activities. 

"Whilst we do not expect a sharp deterioration in NIM trend, we expect NIM to soften slightly by 5-10bp qoq in 2Q19 on weakening loan growth momentum," he said. adding that year-end loan growth is tipped to hit nearly 6% by the end of 2019.