HoonSmart.com>>Kasikorn Research Center analyzed 9 banks in 1Q24, profits grew due to decreased reserves, while the trend of net interest income-NIM slowed from the cost of fixed deposits following economic growth and interest rate trends. Banks remain wary of penetrating business, fearing NPLs will appear.
Kasikorn Research Center Analyzing the performance and trends of 9 commercial banks listed on the stock exchange, the majority of the 1st quarter 2024 budgets were driven by a decrease in debt reserves. Meanwhile, income from the main business recovered within a relatively limited period. For the rest of the year Income from core businesses and loans may benefit more. If the Thai economy maintains a continuous recovery path
However, the bank continues to operate its business cautiously and hasten to address the NPLs problem, while net interest income faces pressure from funding costs. and must follow the direction of interest rates going forward
The bank’s business has begun to show signs of a decline in net interest income as a result of deposit costs gradually catching up.
Five important points can be summarized as follows:
1. Even though the cost of setting up the allowance And the ratio of allowances to credit costs (Credit Cost) of most banks will decrease. But it is still at a higher level than before COVID-19. amidst signs of discontinuous recovery and the uncertain trends of the Thai economy In addition, the slowdown in expenses for setting up 2 allowances is likely a result of the acceleration in stocking up reserves in the recent past.
2. Signals of credit disbursement by the business sector Helping to support the overall loan growth of 9 commercial banks in Q1 to be better than in the end of 2023. Loan outstanding balance from the consolidated financial statements as of Q1 grew 1.6% YoY compared to the same period last year, increasing from 0.7%. YoY in 4Q2023, benefiting from the expansion of business loans and government loans. However, retail loans are still recovering slowly. Many banks also consider lending carefully.
3. Net interest income increased at a slower rate. Meanwhile, the Net Interest Margin (NIM) began to slow because newly issued loans had low returns and financial costs. especially the cost of deposits Starting to catch up following the increase in interest rates on fixed deposits. Net interest income has begun to slow down, in line with NIM that has gradually begun to shrink. After passing the peak in the 4th quarter of 2023
4. Net fee and service income has recovered. But it was an increase of only 3 certain categories, such as selling insurance through banks. (Bancassurance), funds and certain types of payment services while fees for other groups such as wealth management and securities brokerage businesses It is also continuously affected by the volatility of the money and capital markets.
5. The proportion of non-performing loans according to the consolidated financial statements of 9 commercial banks increased to 3.07% of total loans in Q1 from 2.96% of total loans in Q4/2023, which is a result of the classification adjustment. of some business loans Meanwhile, the quality of the retail loan portfolio continues to deteriorate as the economy and household incomes have not yet fully recovered going forward.
Kasikorn Research Center Evaluate the direction of commercial banks and subsidiaries under the assumption that although the Thai economy may gradually recover during the remainder of 2024, there are still many economic uncertainties waiting as follows.
Net interest rate income and NIM still have a chance of continuing to slow down. This is because commercial banks still have to gradually recognize deposit interest costs.
Under the current deposit structure with the proportion of fixed deposits increasing. In addition, we still need to follow the direction of domestic interest rates for the rest of the year. Meanwhile, the follow-up issue will be on the liquidity mobilization plan for the digital wallet project. If it results in tighter liquidity It may be seen that additional deposit campaigns for certain types of deposits are gradually launched to maintain the deposit customer base and net fee income. May receive additional benefits if economic activity gradually recovers.
As for net fee income in 2024, it may return to expand again. From continuously shrinking during 2022-2023, the growth rate may be within a limited range. This is because there are still no fees that can compensate for the income from money transfer service fees that have been waived. Asset quality issues This is still reflected through the level of provisions and credit costs that have not yet decreased back to normal levels. and may see the proportion of non-performing loans at the end of 2024 be higher than at the end of 2023, with loans that still have debt quality issues still being in the group of retail loans and SMEs.
However, we proactively manage the NPLs problem along with restructuring to help retail debtors and SMEs according to responsible and fair lending guidelines. It will help commercial banks gradually become aware of the loan situation in their portfolios and be able to deal with NPLs problems.
“Although income from main businesses and lending of commercial banks may gradually receive additional support. If the Thai economy continues to show signs of recovery during the remainder of 2024, it must be acknowledged that there is still uncertainty regarding many economic factors. As a result, commercial banks continue to conduct business with caution and have issues that must be managed continuously. Especially in the matter of loan quality. Therefore, allowances still need to be set. at a higher level than before COVID-19 Meanwhile, net interest income may face pressure from higher financial costs than last year. We still need to follow the direction of interest rates going forward,” concludes the Kasikorn Research Center.
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