4Q14 Bank Operating Results Remain Static amid Risks (Current Issue No. 2556 Full Ed.)

During 3Q14, Thai commercial banks continued to maintain net profit, thanks to higher net fee income and efficient controls over financial costs and expenses. During 4Q14, it is expected that a gradual economic recovery and seasonal factors will continue to bolster their income from core business, especially net fee income. It is also believed that they should be able to maintain interest income via effective cost management. However, rising expenses due to seasonal factors will likely cause their 4Q14 net profit to stay the same as during 3Q14.

Meanwhile, issues that warrant close monitoring will include unexpectedly low loan growth, debt quality (though commercial banks are quite vigilant towards this) and expenses, especially financial costs that may rise toward the yearend.

With regard to the Bank of Thailand's latest signals that it may cut the policy rate at the upcoming December 17 meeting in an effort to stimulate the economy, if so, such a move would have only a limited effect on 4Q14 operating results of commercial banks because it would occur at the yearend and commercial banks may yet still have to cut their interest rates accordingly, though this would depend on specific conditions of each bank.