“Big Banks” Strong Profits “Rising Interest Rates” Increase Upside

and increased from May to 8.6% after energy prices, food and housing prices in the US continued to rise. With soaring inflation, analysts immediately began adjusting their views on the Federal Reserve meeting later this month.

The Fed was previously expected to raise interest rates by 0.75% for the second time in a row. But when inflation comes out more than expected It is therefore highly likely that the Fed will raise interest rates to 1% at this meeting. As a result, the interest rate rose to 2.75% from the current 1.75%.

Fed officials previously expected that by the end of 2022, interest rates would hit 3.4%, or a further 1.75% rate hike in the remaining four meetings of the year. And by the end of 2023, the interest rate will rise to 3.8% and will return to 3.4% by the end of 2024.

Turning back to Thailand must prepare to receive. “The era of rising interest rates” as well, especially if the US speeds up interest rates We won’t be able to reverse the trend any more. In the last meeting of the Monetary Policy Committee (MPC) on June 8, the signal has already begun. After 3 out of 7 committees voted to raise interest rates.

Therefore, at the next meeting on August 10, the market is confident that the MPC will definitely raise interest rates. But more interesting is that How much will it go up? It was originally expected to rise 0.25% from the current 0.50% to 0.75%, but when US inflation rose more than expected. And there is a high chance that the Fed will raise interest rates to 1% at the meeting on July 26-27, causing the market to urgently adjust its view.

It was viewed that the MPC had to tighten monetary policy more. A 0.25% interest rate hike may not be enough. There is a possibility of raising interest rates to 0.50% at the August meeting, pushing Thailand’s policy rate to 1% to stem capital outflows.

“Rising interest rates” Pressure on the investment atmosphere in risky assets around the world. Because when raising interest rates to bring down inflation, the economy will slow down as well. While in terms of doing business, raising interest rates will increase the cost of entrepreneurs.

But at the same time, there are businesses that will benefit from rising interest rates. led by a group of commercial banks because they will be able to raise interest rates based on the policy rate Usually, interest rates are usually raised on both sides, both the deposit interest rate and the loan interest rate.

so “Rising Interest Theme” will be a major boost to the bank’s performance in the second half of the year.Kasikorn Securities It is estimated that if the MPC raises the policy interest rate every 0.25%, it will be a positive upside to the profits of large banks in 2023, including Bangkok Bank (BBL), Krung Thai Bank (KTB) and SC Plc. B-X (SCB) around +7%

Bank of Ayudhya (BAY) +5%, TMB Bank (TTB) and Bank of Kiatnakin Phatra (KKP) are expected to increase by +1%.

As this period enters the season to announce the results of the bank group for the second quarter of 2022, it is another story that helps drive the share price. Even based on data from Bloomberg Consensus, the eight banks studied will have a combined net profit of 49,161 million baht, down 4.5% qoq and 2% y-o-y. But when drilling individually, it can still be speculative. Especially big banks with strong profit growth.

byDBS Vickers Securities (Thailand) The research bank is estimated to have net profit in the second quarter of 2022 totaling 41.4 billion baht, an increase of 16% from the same period last year, but a decrease of 7% from the previous quarter. Bangkok Bank (BBL) and Kasikorn Bank (KBANK) reported higher net profit compared to the same period last year. After provision for credit loss (ECL) decreased and net profit increased qoq in line with revenue growth.

Kiatnakin Phatra Bank (KKP) posted the largest net profit growth in the group 34% year-on-year. This was due to higher net interest income (NII) following loan growth and lower ECL provision.


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