Thailand: Banks feel dropped-fee pinch

The banking industry is expected to announce 10% lower earnings for the second quarter than the previous quarter, mostly attributed to the decision to eliminate fees for digital transactions.¬
2847830KGI Securities forecasts the combined net profit of nine listed banks in the second quarter of the year at 46.05 billion baht, down 10.7% quarter-on-quarter, but¬ increasing 3.3% year-on-year. The nine banks under its coverage are Bangkok Bank (BBL), Krungthai Bank (KTB), Siam Commercial Bank (SCB), Kasikornbank (KBank),¬ Bank of Ayudhya (BAY), Thanachart Bank, TMB Bank, Tisco Bank and Kiatnakin Bank.¬
The lower results mainly stem from the zero-fee scheme for online transactions introduced in March, covering internet and mobile banking.¬
KBank, the country’s fourth-largest lender by assets and top-ranked in mobile banking service, is expected to be hardest-hit by the no-fee scheme.¬
KGI has cut its outlook for KBank’s transaction fee income to 9.68 billion baht for the second quarter, declining 70% from the previous forecast. As well, the bank’s non-¬ interest income (NII) for the second quarter is expected to decline 18% year-on-year.¬
KGI also cut its outlook for transaction fee income of the other big three players: Siam Commercial Bank (SCB) by 50%, Bangkok Bank (BBL) and Krungthai Bank (both by¬ 40%). The negative factor, on a year-on-year basis, will lower the NII of BBL by 5%, KTB (6%) and SCB (7%).¬
Maybank Kim Eng Securities predicts the eight banks excluding BAY will post a total net profit of 40.3 billion baht for the second quarter, down 11% quarter-on-quarter,¬ but rising 4% year-on-year.¬
The lower earnings, on a quarter-on-quarter basis, are being pinned on the scrapping of the transaction fees for the big four banks.¬
KBank, with the largest number of mobile banking users in the industry (8.4 million), will be most affected. The bank’s second quarter net profit is expected to drop 19%¬ quarter-on-quarter, followed by 14% for KTB, 10% for SCB, and 6% BBL.¬
Despite lower fee-based income, loan loss provisions for the big players will decline from the previous quarter, in line with asset quality.¬
Kattiya Indaravijaya, KBank’s president, said the bank estimates lower fee-based income in the second quarter of this year than in the first quarter after the bank¬ eliminated banking transaction fees over digital channels in late March.¬
Apart from the free service for online banking transactions, higher prudence on bancassurance and mutual fund sales under the central bank’s market conduct¬ regulations is another key factor dampening fee income.¬
Meanwhile, the bank expects net interest margin (NIM) growth of 3.2-3.4% for 2018.¬
The improving NIM is expected to be supported by better financial cost management among positive loan demand, in line with robust economic growth, while interest rates remain unchanged.¬
The Bank of Thailand is expected to maintain its repurchase rate at the existing level of 1.5% by the end of the year.¬

Source:¬ https://www.bangkokpost.com/business/finance/1504174/banks-feel-dropped-fee-pinch