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No sign of bubbles in banking sector

The governor of the Bank of Thailand has expressed confidence that there were no signs of bubbles in the banking sector, which witnessed average loan growth of more than 10 per cent in the first half of this year.

Most of the commercial banks’ loans were extended for investment and acquisition, central bank chief Prasarn Trairatvorakul said.

“Now, there is no sign of bubble. We are following this as loans grew over 10 per cent in the first two quarters. A survey by our officials with banks’ executives showed that most loans were extended for activities like investment or acquisition, not for speculation that may cause bubbles,” he said.

Siam Commercial Bank (SCB) posted net profit of Bt8.1 billion in the second quarter, up 53 per cent from the same period in 2010. The profit surge was attributed to a 29.7-per-cent increase in net interest income on the back of 21.1-per-cent loan growth, and a 36.4-per-cent rise in non-interest income from increase in insurance premiums.

Non-performing loans (NPL) dropped to 2.69 per cent, a new low after the 1997 financial crisis.

TMB Bank’s second-quarter net profit of Bt1.2 billion showed a 9-per-cent increase from the previous quarter and 38 per cent from the same period last year.

Its net interest margin (NIM) rose to 2.45 percentage points in the second quarter from 2.21 in the previous quarter. Its fee-based income grew 4 per cent from the previous quarter and 16 per cent from the previous year.

In the quarter, the bank witnessed a 6-per-cent increase in loan extension, thanks to loans extended to large-sized businesses, SMEs and retail customers. TMB reported a decline in NPL to 6 per cent at the end of June, from 6.96 per cent at the end of the first quarter. Its capital adequacy was 16.8 per cent at the end of the second quarter.

CIMB Thai Bank reported a year on year 24.9-per-cent drop in net profit of Bt536.4 million for the first half of 2011, as it had posted extraordinary gains from asset disposal during the first half of 2010.

If these items were excluded, this year’s first-half profit should be seen as a 160-per-cent increase on higher net interest income and net fee income.

The bank recorded a 6.8-per-cent rise in net interest income for the first half due to loan expansion. At the end of the first half, total gross loans less unearned interest grew 8.4 per cent from 2010 year-end on SME and retail portfolio expansion.

Its net fee and service income jumped 48.4 per cent, thanks to loan related fees.

NIM over earning assets dropped to 3.65 percentage points in the first half of this year from 3.95 percentage point in the same period of 2010 due to increased deposit rates.

The bank’s NPL rose to 3 per cent at the end of the second quarter, from 2.7 per cent at the end of the fourth quarter last year, as a result of a change in provisioning policy effective from June 2011. Its capital adequacy ratio was 13.72 per cent.

Source: The Nation

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