Large provision requirements for loans to Sahaviriya Steel Industries Plc's British plant are expected to hammer the 2015 earnings of SSI's three lenders -- Siam Commercial Bank (SCB), Krungthai Bank (KTB)...
All three are expected to set aside additional reserves in this quarter for the loans to SSI UK Ltd, the operator of a now-halted steel plant in England, prompting Krungsri Securities to trim earnings...
The broker revised down its 2015 net profit outlook to 27.9 billion baht from 30.6 billion for KTB, to 47.1 billion from 48.8 billion for SCB and to 3.6 billion from 4 billion for Tisco.
SSI, Thailand's largest maker of hot-rolled coil, and its British arm had borrowed a combined 48.4 billion baht from the three lenders.
KTB and SCB lent 22 billion baht each and Tisco 4.4 billion. Of the total 48.4 billion baht, 28 billion had been loaned to SSI UK and the rest to SSI.
SSI UK temporarily suspended operations at its facility last Friday. The three creditors then called for the Thai parent, a guarantor of its subsidiary's loans, to pay the debt
To cushion against default risk, the three banks have chosen to set aside full provisions for the 28 billion baht in loans to SSI UK.
SCB, the country's third-biggest lender by assets, estimates its third-quarter provision for the SSI group at 11 billion baht, while KTB's will be about 9 billion.
Small bank Tisco has a full provision only for SSI UK. The loan to the parent firm is fully covered by collateral
The local steel maker has suffered hefty losses driven by the poor performance of its British subsidiary, which runs a plant acquired by the group in 2011
SSI posted consolidated net losses of 3.24 billion baht in the second quarter and 6.26 billion for the first half, with negative shareholders' equity of 1.78 billion baht
KGI Securities has also cut its 2015 net profit outlook to 22.6 billion baht from 28.2 billion for KTB, to 44.6 billion from 46.9 billion for SCB and to 3.46 billion from 4.62 billion for Tisco.
Phillip Securities (Thailand) analyst Adisorn Mungparnchon expects the greater provisions by SSI's creditors will affect the banking sector as a whole in terms of full-year net profit, citing the role...
The industry's 2015 net profit is forecast to decline by 5.8% from last year, he said.
KTB's 2015 net profit would be 23 billion baht, down from an earlier forecast of 30 billion, while SCB's would fall to 51 billion baht from 53 billion
Ronadol Numnonda, a Bank of Thailand assistant governor, said non-performing loans in the financial system would rise to 2.86% from 2.46% in July if the Sahaviriya group's debt deteriorated into non-performing...