Bangkok--23 Jul--Fitch Ratings Fitch Ratings has today said that the major Thai banks’ H1 results show resilience amidst global economic shocks and local political uncertainty, as some banks reported stronger results compared to 2007. Nonetheless, the weakening economic outlook and falling consumer and business confidence will likely impact growth and asset quality in the second half. As projected by the agency, TMB Bank Public Company Limited (TMB) reported a marked turnaround, while Bank of Ayudhya Public Company Limited (BAY) and Krung Thai Bank Public Company Limited (KTB) also reported stronger results. The leading banks, Bangkok Bank Public Company Limited (BBL), Siam Commercial Bank Public Company Limited (SCB) and Kasikornbank Public Company Limited (KBANK) generally maintained strong results. Barring further economic or political shocks, lower provisioning and higher loan growth should see overall stronger results in 2008 for the Thai bank sector. “Despite the turmoil in credit and equity markets globally, the stronger Thai banks so far continue to perform well, namely SCB, KBANK and BBL - each rated ‘BBB+’. As reflected in Fitch’s earlier upgrade in January (to ‘BBB-’ (BBB minus)), TMB reported a marked turnaround from losses in previous years, although integration with ING Bank could see results constrained this year. The ongoing transformation at BAY following its tie-up with GE Capital in January 2007, should see a further strengthening in its credit profile and performance in the next year, reflected in Fitch’s Positive Outlook on the bank,” comments Vincent Milton, Managing Director of Fitch Ratings Thailand and Senior Director, Financial Institutions. “A pick-up in corporate loan growth is offsetting some moderation in growth to SMEs and consumers. Nonetheless, given the prolonged period of high oil prices and renewed domestic political uncertainty which is impacting consumption and investment, performance for the sector in the second half of the year will likely weaken. The operating environment remains challenging and heightened credit and market risks could impact results over the next year, although the major banks should be more resilient,” adds Mr. Milton. TMB reported a net profit of THB2.8bn for the first half (following a THB43.5bn loss in 2007), permitting the bank at the end of June 2008 to renew interest coupons on its hybrid Tier 1 instrument (rated ‘BB-’ (BB minus)) as Fitch had earlier projected. BAY reported a net profit of THB3bn for the first half (after a THB4bn loss for 2007) and KTB reported higher net profit of THB6.2bn for H1 (from THB6.4bn for the full year 2007). Provisioning risks still remain for BAY and KTB given their lower loan loss reserve coverage ratio, although BAY should have greater clarity on its reserve position by year-end as it disposes of further bad loans; provisioning rose significantly at KTB and SCB in Q2, the latter due to credit deterioration at its auto finance unit. The bellwether banks all reported solid net profit for H1 as follows - BBL: THB10.7bn; SCB: THB12.7bn; and KBANK: THB8.7 bn. BBL reported the highest underlying loan growth of over 12% in the first half helped by a jump in working capital requirements for larger corporates and SMEs as well as growth from its offshore branches, while TMB’s loan book continued to shrink by a further 6%. BAY’s loans increased by 20% mainly due to the acquisition of GE’s used car finance portfolio. The major banks still appear to be on track to report impaired loans of less than 5% by year-end, helped by an acceleration of asset sales to clean-up their remaining legacy bad loans from the 1997 crisis. NPLs rose slightly in H1, although ratios declined as loan books expanded. The weakening credit environment and asset disposals could see higher provisioning for some of the banks and further losses on asset disposals, although capital ratios should remain strong. Funding costs are also expected to rise as liquidity tightens and smaller banks may be subject to rising funding pressures. While results could weaken in the second half, Fitch expects SCB, KBANK and BBL to continue to report solid financial results. BAY, TMB and KTB should report an overall improvement in performance in 2008 due to lower provisioning and a pick-up in loan growth. The rating outlook on Thai banks is generally stable. A full report on the results and update on the outlook will be released in the next week. Contacts: Vincent Milton, Bangkok +662 655 4759; Patchara Sarayudh, Bangkok +662 655 4761. Disclosure: Kasikorn Asset Management Company Limited (of which KBANK holds 99.99%) owns 10% of the shares in Fitch Ratings (Thailand) Limited. No shareholder, other than Fitch Ratings Limited of the UK, is involved in the day-to-day operation of, or credit rating reviews undertaken by Fitch Ratings (Thailand) Limited. Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.