We are optimistic about SAWAD’s 2021 outlook, as it has established a joint venture with the Government Saving Bank. The venture will enable the finco to lend to the GSB’s client base, accelerating business and profit expansion. Furthermore, it should benefit from the GSB’s lower cost of funding. We expect fee income to expand in tandem with rising sales of insurance products and the cost/income ratio to decline, as the mean number of staff per sales-point is being reduced. Note that Thailand’s third COVID-19 outbreak presents some downside risk to our earnings projection.
Profit was below our estimate, as NII was lower than assumed
SAWAD posted 2Q21 earnings of Bt1.11bn, up 13% YoY but down 19% QoQ. The result was 8% below our projection and 10% shy of the Bloomberg consensus, due mainly to lower NII than expected (we had assumed Bt1.8bn; SAWAD reported NII of only Bt1.4bn). Pre-provision operating profit came to Bt1.5bn, up 3% YoY but down 13% QoQ. Earnings for 1H21 comprise 45% of our full-year forecast of Bt5.5bn.