It was a rather sombre picture as Thai banks, in reports to the Stock Exchange of Thailand, reported an overall 23% drop in profits for last year. All expressed caution and uncertainty about the year ahead and concern over the prolonged nature of the pandemic and it’s extended economic impact.
Thai banks listed on the SET stock exchange this week reported a sharp drop in profits for 2020 due to the Covid-19 virus except for one bank, TMB-Thanachart Bank, which reported a 40% surge in 2020 due to the merger between TMB Bank and Thanachart Bank which allowed the new entity to take advantage of cost efficiencies and strengthen its loan portfolio. Most banks, however, saw profits plummet as they provided for credit losses. All the banks agreed that the outlook for this year is still unsettled.
Three of Thailand’s top banks have reported higher provisions for expected credit losses as they confirmed a sharp decline in profitability for 2020. All banks saw the outlook for 2021, right now, as one of uncertainty.
Overall, Stock Exchange of Thailand listed banks saw a drop in their bottom line in the order of 23% for last year.
Kasikornbank reports high expected credit losses at the end of the year with a 23.9% profit drop
Kasikornbank and a range of associated subsidiaries recorded a net profit of ฿29.6 billion.
The bank revealed that it had made a large provision for ECLs in the first half of the year given the scale of the economic setback caused by the 2020 lockdown imposed by the government. Consequently, ECL provisions in the last quarter were not as high as other institutions.
The profit for the bank was off by ฿9.24 billion on the previous year’s results, a fall of 23.9%.
A briefing on the bank’s performance for 2020 was given to the Stock Exchange of Thailand by its Chief Executive, Kattiya Indaravijaya.
Largest business lender in Thailand
Kasikornbank is the largest business lender in Thailand.
In all, the financial institution set aside ฿43.6 billion in expected credit losses for the year to the 31st December 2020 which was up also by 23.9% on the year previously.
At that point, the bank recorded no less than ฿3.65 trillion in assets, up by 11.9% from 2019, a gain of ฿365 billion.
KBank’s non-performing loan ratio stood at 3.93%, a rise of 3.65% from the year before and caused by the Covid-19 pandemic.
Under the international banking regulatory framework, known as Basel III, adopted after the world financial crisis from 2007 to 2009, the bank has a capital adequacy ratio of 18.8% with its tier-1 ratio coming in at 16.1%.
Bank of Ayudhya sees profits nosedive by 30%
Meanwhile, Bank of Ayudhya told the market that it had suffered a profit fall of 30% last year.
Net profit for 2020 came in at ฿23 billion. This was ฿9.7 billion lower than the figure for the year previously.
The loss was also attributed to higher ECL provisions because of the virus outbreak.
‘This was driven by lower operating profit in the absence of extraordinary items recorded in 2019 and a higher provision corresponding to higher ECLs,’ a statement issued by Bank of Ayudhya to the SET explained.
All banks refer to the uncertainty in the market generated by the second outbreak of the virus
The bank referred to the climate of uncertainty that has been generated by Covid-19 aggravated by the second wave of the virus as last year drew to a close.
Bank of Ayudhya revealed that its non-performing loan ratio for 2020 was 2% up very marginally from 1.98% 12 months previously.
It also revealed a loan coverage ratio of 175% which was higher than in 2019 when it came in at 164%.
TMB-Thanachart Bank bucks the trends with a 40% rise in profits as it benefitted from lower costs after the merger of the two lenders that is ongoing
It was quite a different picture for the newly merged entity TMB-Thanachart Bank which posted a 40% rise in profits in 2020 due to the merger of the two banks and cost efficiencies. The merger is ongoing and expected to be completed by July this year.
The bank explained that it had focused its efforts in 2020 not on loan growth but on improving the quality of its loan portfolio and maximising the benefits of the merger of the two financial institutions.
By doing this, its net profit rose to ฿10.1 billion while its non-performing loan ratio edged up only slightly from 2.35% to 2.5%.
Bank is cautious going into 2020 about the ability of borrowers to repay loans, it has raised provisions
However, the bank took a cautious view moving forward into 2021. While it was pleased that most of its customers exited the debt relief scheme launched by the Bank of Thailand last year, it took the view that ongoing uncertainty being generated by the pandemic may impact loan repayment ability in 2021.
Consequently, it raised its loan coverage ratio at the end of 2020 to 134% from 120% the year previously.
The bank’s loan book stood at ฿1.34 trillion at the end of 2020.
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