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Thailand's big banks weather end of digital banking fees

Four largest lenders post 21% surge in combined net profit

A Siam Commercial Bank branch in central Bangkok.   © Reuters

BANGKOK -- Despite an anticipated negative impact from an industry-wide move to scrap digital banking fees, combined second-quarter net profit at Thailand's four largest lenders jumped 21% on the year to 32.2 billion baht ($963 million).

The uptick, which came after a year-on-year drop in combined net profit in the previous quarter, was largely because the banks set aside lower allowances for potential defaults as the overall economy shows signs of recovery.

According to stock exchange filings on Thursday and Friday, all four banks -- Bangkok Bank, Krung Thai Bank, Siam Commercial Bank and Kasikornbank -- booked smaller or marginally larger provisions than a year earlier.

Among them, state-owned Krung Thai Bank enjoyed the largest increase in net profit, which more than doubled to 7.7 billion baht while its impairment on loan loss provisions fell to less than half. Pre-provision profit, meanwhile, was down 5% on the year.

At Kasikornbank, the fourth-largest lender by assets, net profit climbed 21.5%, again thanks to a smaller loan loss impairment. Bangkok Bank also booked a double-digit net profit increase, although provisioning increased marginally.

Siam Commercial Bank was the only major lender to suffer a year-on-year earnings decline, as net profit slumped 6.7% despite a 0.1% drop in loan losses. The downturn was attributed to hefty investment in new technology platforms as it seeks to focus more on digital banking.

As part of its transformation efforts, Siam Commercial Bank launched a fee waiver for retail transactions through digital channels in March, which was followed immediately by other banks doing the same, over fear of losing their mobile banking clients.

That move was seen impacting banks' second-quarter results, with Kasikornbank President Kattiya Indaravijaya telling reporters before the earnings release earlier this month that the lender was "expecting an overall 6% to 8% contraction in non-interest income for the full year." 

The bank was viewed by analysts to be hit hardest by the fee waiver, due to its large mobile banking customer base. Although non-interest income for the period grew 7% owing to higher capital market product, net fees and service income slid 9.7% due to the fee waiver.

Net fees and service income was also marginally down at Siam Commercial Bank, while Bangkok Bank and Krung Thai Bank reported gains of 4.4% and 1.28%, respectively. Krung Thai, however, said in a statement that growth slowed down from the previous quarter because of the fee waiver.

Going forward, some analysts are expecting positive outlooks for the big bank's earnings, in line with a possible rate boost by the central bank.

In a report issued just before second-quarter results were issued, Maybank Kim Eng Securities upgraded the Thai banking sector to positive from neutral, on expected "catalysts from potential rate hikes."

The securities house projects a 2% to 5% uplift in the four banks' earnings per share in the next 12 months if they raise their loan rates in line with the Bank of Thailand, which it expects could happen as soon as November.

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