This article first appeared in The Edge Financial Daily on October 20, 2017

KUALA LUMPUR: CIMB Thai Bank PCL, a subsidiary of CIMB Group Holdings Bhd, announced yesterday its net profit for the first nine months of financial year 2017 (9MFY17) came in 30% lower year-on-year (y-o-y), as provisions grew because of higher non-performing loans.

CIMB Thai, which is 94.11%-owned by CIMB Group, said its nine months ended Sept 30, 2017 recorded a net profit of 243.9 million Thai baht (RM31.03 million), compared with 554.4 million Thai baht a year ago, as provisions rose 9.8% y-o-y.

“Operating income rose by 145.3 million Thai baht (or 1.5%) to 9.84 billion Thai baht, mainly contributed by net interest income and net fee and service income growth,” its statement to Bursa Malaysia showed.

It said net interest income grew 3.6% or 266.7 million Thai baht, mainly driven by lower interest expenses, while higher advisory, mutual funds and hire-purchase fees resulted in a  21% y-o-y improvement in net fee and service income.

“Pre-provision operating profit increased 0.6% y-o-y to 4.41 billion Thai baht from higher income and a 2.3% y-o-y growth in operating expenses,” it said.

It also noted that its net interest margin (NIM) over earning assets stood at 3.88% in 9MFY17, compared with 3.76% in 9MFY16, as a result of more efficient management of funding cost.

“Gross NPL (non performing loans) stood at 12.2 billion Thai baht, with a lower equivalent gross NPL ratio of 5.7% compared to 6.1% as at Dec 31, 2016.

“The lower NPL ratio was mainly due to the sale of some NPLs in the first quarter of 2017 (1QFY17), more efficient risk management policies and improved asset quality management and loan collection processes,” said CIMB Thai president and chief executive officer Kittiphun Anutarasoti.

He also noted that CIMB Thai’s loan loss coverage ratio increased to 85.1% as at Sept 30, 2017 from 77.3% at end-December 2016.

“As at 30 September 2017, our total provisions stood at 10.3 billion Thai baht, showing an excess of 3.6 billion Thai baht over Bank of Thailand’s reserve requirements.

“Total consolidated capital funds as at Sept 30, 2017 stood at 43.8 billion Thai baht. The BIS ratio stood at 18%, 12.7% of which comprised Tier-1-capital,” he added.

CIMB Thai’s financial statements showed that its 3Q net profit contracted to 76.54 million Thai baht from 431.07 million Thai baht a year earlier, as the group recorded higher employee expenses, as well as higher bad and doubtful debts and impairment losses.

The quarter’s total operating income, however, rose to 3.46 billion Thai baht from 3.21 billion Thai baht, thanks mainly to improved net interest income, net fee and service income, and gains on trading  and foreign exchange translations.