Thai banks predicted to report 17% rise in 2Q13 profits

SME lending rising strongly from depressed levels.

Nomura projects Thai banks to report a 17% y-y rise in 2Q13 profits although clearly these numbers are being overshadowed by rising global risks posed by China/rising dollar interest yields. The immediate risk from this backdrop is lower non-interest income given the sell-off in equities and bonds.

Here's more from Nomura:

Meanwhile, we expect loan growth to decelerate to 12% y-y in 2Q13 (from 14% in 4Q12 and 18% in 3Q11) primarily on sharply slowing retail growth (implying a loan-GDP growth multiplier of 2.0x). However, we expect these results to show a continued improvement in cost ratios, subdued provisions (higher retail NPL formation offset by low corporate and SME NPLs) and relatively stable margins

We project a 17% y-y increase in 2Q13 profits as part of our 27% y-y increase in 2013F profits. We expect loan growth to decelerate to 12% y-y primarily on slower retail growth (but we expect a re-acceleration to 14% by the end of the year).

We expect margins to be stable/rise slightly q-q whilst fee income to assets is expected to rise further (although overall non-interest income to assets will be down q-q given exceptional items booked in 1Q). We estimate that cost-income ratios will be up q-q (from a seasonally-low 1Q) but down y-y. Provisions to loans will be down q-q (given exceptional items in 1Q) but up y-y, in our view. 

Whilst we remain negative on the retail segment for Thai banks following a strong cycle over the past 10 years, our positive view on corporate/SME lending remains. Business confidence remains elevated underpinning an investment cycle from a depressed base. Note that investment readings have been soft so far this year although this is distorted by the post-flood rebuild.