Commercial banks show sharp recovery in 2021 earnings

Larger commercial banks in Thailand have begun reporting their financial performance for 2021 and most are seeing some recovery from the pandemic.

Commercial banks, which are bound by law to report their earnings within 15-days after the end of the quarter, show that during the Q4 of 2021, their were clear signs of economic recovery thanks to the improved Covid-19 situation.

Analysts say that they expect the banking industry to see some recovery going into 2022 as the country starts to once again open up.

KGI analysts expect core earnings of most banks to recover along with easing lockdown restrictions. “Relaxed regulations for dealing with bad debt and credit cost reduction would be key drivers to boost operations in 2021.” 

Looking ahead, KGI predicts an uptick in loan growth as a result of the jump in commodities prices, which is driving demand for working capital, as well as higher interest rates.

“Big banks will benefit from the interest rate cycle,” KGI said, adding that small banks will earn less given the large amount of fixed loans loaded in their portfolios. Their top picks are Kasikorn Bank Plc (KBANK), Siam Commercial Bank (SCB), and Krungthai Bank (KTB)

As of the morning session, the stock price of KKP rose by 2.65% to 67.75 baht despite small drops among other bank stocks.

Banks that have already announced their earnings to the Thai Stock Exchange (SET) are:

Bangkok Bank (BBL)

BBL, the country’s largest bank reported the strongest earnings with a net profit for the year at a staggering 26.5 billion baht, or an earnings per share (EPS) of 13.89 baht, a rise of 54.3% year-on-year. 

The bank said that during 2021 it and its subsidiaries saw net interest income rose by 6.6% from last year due to the full-year consolidation of its Indonesian acquisition – Permata, whose net interest income and lower interest expenses resulted from cost management. The net interest margin stood at 2.10%. 

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BBL said that its non-interest income rose by 25.7% mainly due to an increase in net fees and service income from securities business, loan-related services, bancassurance and mutual funds, along with an increase on gains on mark to market of financial assets in line with the market environment.

BBL also said that as of end of December 2021, the Bank’s total loans amounted to 2.59 trillion baht, an increase of 9.3% from the end of last year, due mainly to loans to large corporate customers and loans made through the international network. The non-performing loan to total loans ratio decreased to 3.2%.

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Kasikornbank (KBANK)

KBANK, the country’s 4th largest commercial bank, reported its net profit in 2021 of 38 billion baht, up 29% year-on-year.

The bank said that the rise in the profitability was partially due to the recovery of the Thai economy during the later part of 2021 after a severe contraction caused by the COVID-19 outbreak in 2020. 

Operating performance for the year of 2021, KBank and its subsidiaries reported net profit of Baht 38 billion baht, and for the 4th quarter the bank reported net profit of 9.9 billion baht.

The bank said that the profitability rise due to a decrease in expected credit loss amounting to 3.22 billion baht or 7.38%. KBank and its subsidiaries consider to set aside expected credit loss in the year of 2021 amounting to 40.33 billion baht, which consistently conform with prudent approach.

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However, Kbank came out to say that the Thai economy is likely to be challenged in early 2022 by rising risks from the Omicron variant of COVID-19, which has already begun to trigger authorities’ reintroduction of tighter containment measures. 

​​Bank of Ayudhya (BAY)

BAY, which is the 5th largest commercial bank and the only one in top 5 to be majority owned by foreigner – MUFG of Japan, reported its net profit in 2021 of 33.8 billion baht, up 47% year-on-year.

Although the profit of BAY looks high, the reason BAY reported higher profit was due to the fact that the bank was able to divest a substantial stake in one of its subsidiaries, therefore it is a one-time gain for the bank.

BAY said that for 2021, the net profit of 33.79 billion baht was recorded, representing a robust increase of 46.7%, or an increase of 10.75 billion baht, from 2020, driven by the gain on investments from the sales of shares in Ngern Tid Lor Plc (TIDLOR) in 2Q/2021. Excluding the one-time gain from TIDLOR transaction, a normalized net profit of 25.61 billion baht was registered in 2021, representing an increase of 11.1%, or 2.57 billion baht seen during 2020.

Other banks that reported their performances were

TMBThanachart Bank (TTB)

TTB reported its net profit in 2021 of 10.5 billion baht, up 3.6% year-on-year. 

TISCO Financial Group (TISCO)

TISCO reported its net profit in 2021 of 6.8 billion baht, up 11.8% year-on-year. 

Kiatnakin Phatra Bank (KKP)

KKP reported its net profit in 2021 of 6.3 billion baht, up 24% year-on-year. 

CIMB Thai Bank (CIMBT) 

CIMB reported its net profit in 2021 of 2.5 billion baht, up 89% year-on-year. 

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