July 21, 2016 / 12:45 PM / a year ago

UPDATE 1-Thai top lender Bangkok Bank hit by decline in investment gains

* Bangkok Bank Q2 profit 7.17 bln baht vs 8.3 bln forecast

* Kasikornbank Q2 profit down 18 pct, H1 loans up 3.24 pct

* Krung Thai Q2 profit up 2.7 pct, H1 loans down 2.67 pct (Recasts with earnings from other banks)

By Khettiya Jittapong and Manunphattr Dhanananphorn

BANGKOK, July 21 (Reuters) - Major Thai banks reported weaker-than-expected quarterly earnings on Thursday as they booked higher provisions to cover rising bad debt amid a gradual recovery in the country’s economy.

The recovery in southeast Asia’s second-largest economy is still relatively fragile as exports and domestic demand remain weak. However, it grew 3.2 percent in the first quarter, its fastest annual pace in three years.

Thailand’s largest lender, Bangkok Bank, was also particularly hit by decline in gains on investments and rising expenses because most of its excess liquidity is invested in low-risk assets such as government bonds.

The bank’s second-quarter net profit dropped 10.8 percent from a year earlier, to 7.2 billion baht ($205.8 million), lower than the average forecast of 8.3 billion baht by 11 analysts polled by Reuters.

Non-performing loans (NPLs) rose to 3.1 percent of total lending at the end of June versus 2.9 percent end-March, while provisions rose 18 percent from a year earlier, it said in a statement.

Bangkok Bank said gains on investments, of which 59 percent is in government and state enterprise bonds, plunged 98 percent in the second quarter.

Its lending grew 2 percent in the first half thanks to the government’s spending and booming tourism, while fourth-ranked Kasikornbank posted loan growth of 3.24 percent in the same period.

In a separate statement, Kasikornbank reported an 18 percent drop in second quarter net profit to 9.43 billion baht, while NPLs rose to 2.89 percent at the end of June from 2.7 percent at the close of 2015.

This compared with average 9.97 billion baht forecast by 15 analysts polled by Reuters.

Kasikornbank’s gain on investments also plunged 84 percent, it said without giving detail.

Unlike peers, Krung Thai Bank, Thailand’s second-largest lender, said its quarterly net profit edged up 2.7 percent from a year earlier due to rising interest income and improving margin.

The bank posted net profit of 8.68 billion baht for the April-June quarter, higher than the 7.37 billion baht forecast by 14 analysts polled by Reuters.

KTB’s net interest margins rose to 3.28 percent in the second quarter, versus 3.11 percent a year earlier.

However, the bank set aside provision of 7.74 billion baht in the second quarter, up 3 percent after its non performing loan increased to 3.89 percent of lending at end June from 3.7 percent at end March. ($1 = 34.9900 baht) (Reporting by Khettiya Jittapong and Manunphattr Dhanananphorn; Editing by Keith Weir)

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