LH FINANCIAL GROUP LH FINANCIAL GROUP PUBLIC COMPANY LIMITED
MANAGEMENT DISCUSSION AND ANALYSIS
FOR THE SECOND QUARTER ENDED 30 JUNE 2022
(THIS REPORT DISCUSSES PRINCIPAL CHANGES TO THE unREVIEWED AND unAUDITED
CONSOLIDATED FINANCIAL STATEMENT)
LH Financial Group Public Company Limited
Executive Summary
In the 6-month period of 2022, Land and Houses Financial Group showed the operating profit of Baht 2,188 million or 3.4% when compared to the same period of previous year. The major increase was net interest income of 17.9% and insurance agent income of 65.2% and had the net profit of Baht 745 million. The bank still set aside the provision for expected credit losses under conservative basis to support the expansion of credit and potential impacts from the end of customers' relief measures. As a result, the coverage ratio remained high at 196%, although the NPL ratio dropped from 2.77% at the end of 2021 to 2.57% by the second quarter of 2022. The capital remains solid with the coverage ratio at 16.4 % which is higher than the Bank of Thailand's requirement.
Net assets amounted to Baht 274,297 million, grew by 3.7% from the end of 2021, mainly due to the loan growth of 7.5%. In addition, Taiwanese loans expanded by 49.8% from the end of 2021 as a result of the support from CTBC Bank.
Land and Houses Financial Group had developed a wide range of products and services that meet customers' demand, especially digital products such as Digital Pro-fit, which had increased the number of customers' services by 121.8% from the same period last year. Land and Houses Bank had renovated a total of 8 branches to be the advisory branches, as well as developed the potential of investment advisors to be professional advisors and to have a culture of serving customers beyond expectations.
Overview of Business Operation
LH Financial Group Public Company Limited is a parent company of the financial business group which consists of the companies as follows:
- Land and Houses Bank Public Company Limited
- Land and Houses Fund Management Company Limited
- Land and Houses Securities Public Company Limited
Management Discussion and Analysis for the Second Quarter ended 30 June 2022 | Page 2/20 |
LH Financial Group Public Company Limited
Structure of the Financial Business Group, LH Financial Group Public Company Limited
Investment
Commercial Bank | Fund Management | Securities |
Economic Overview and Competition in Commercial Banking Industry
In the second quarter of 2022, Thailand's economy has seen continued growth from the key driver from improving domestic demand both in terms of private consumption and private investment, corresponding to the normal resumption in economic activities. In addition, the recovery in tourism with 6 million foreign tourists would be expected in 2022 (Source: Bank of Thailand) on the back of further easing of international travel restrictions in both Thailand and several countries as well as the continued expansion in export volumes also helped boost economic growth during the period. However, rising cost-push inflation following the global oil price surge put high pressure on consumer confidence that remained weak from the concerns over rising cost of living and slower public spending.
The Bank of Thailand predicted that the Thai economy would grow by 3.3% in 2022 (as of June 2022), driven by reviving domestic demand and tourism. However, the risks obstructing economic growth in the second half of 2022 include global economic slowdown, surges in cost of living and production costs caused by the prolonged Russia-Ukraine conflicts, higher-than-expected inflation rate resulting in tighter monetary policy, Baht depreciation with high volatility and persistent COVID-19 pandemic which was still the big obstacle to the economic expansion for the second half of 2022.
Management Discussion and Analysis for the Second Quarter ended 30 June 2022 | Page 3/20 |
LH Financial Group Public Company Limited
The banking industry in the second quarter of 2022, deposits and loans continued to expand, especially in commercial loans since business sector needed more working capital to cover higher production costs and to support the export growth. Meanwhile, consumer loans grew at a slower pace due to the impacts of high household debt and cost of living. However, the overall performance of Thai commercial banking system remained solid with high levels of capital and reserve funds.
Analysis of Operating Results
In the second quarter of 2022, the operating results of the company and its subsidiaries showed the net profit of Baht 233.3 million, decreased by 54.4% when compared to the first quarter of 2022 with the net profit of Baht 511.7 million thanks to the decrease in net fees and service income by 5.7% and the increase in expected credit losses by 61.1%. The net profit decreased by 51.1% when compared to the second quarter of 2021 with the net profit of Baht 477.5 million, due to the decrease in gains on investments.
In the 6-month period of 2022, the operating results of the company and its subsidiaries showed the net profit of Baht 745.0 million, decreased by 28.2% when compared to the 6-month period of 2021 with the net profit of Baht 1,038.0 million due to the decrease in gains on investments, dividend income, net fees and service income and the increase in expected credit losses.
Net Interest Income
In the second quarter of 2022, net interest income amounted to Baht 1,503.8 million, increased by 4.1% when compared to the first quarter of 2022 due to the increase in interest income by 3.3%, and net interest income increased by 18.2% when compared to the second quarter of 2021. Interest income was Baht 2,069.3 million, increased by 10.4% and interest expenses were Baht 565.5 million, decreased by 6.1% when compared to the second quarter of 2021.
In the 6-month period of 2022, net interest income amounted to Baht 2,948.5 million, increased by 17.9% when compared to the 6-month period of 2021. Interest income was Baht 4,072.5 million, increased by 9.4% and interest expenses were Baht 1,124.0 million, decreased by 8.0% when compared to the 6-month period of 2021.
Net Non-Interest Income
Net non-interest income comprised net fees and service income, net gains (losses) on financial instruments measured at the fair value through profit or loss, gains on investments, dividend income and other operating incomes.
Management Discussion and Analysis for the Second Quarter ended 30 June 2022 | Page 4/20 |
LH Financial Group Public Company Limited
In the second quarter of 2022, net non-interest income amounted to Baht 445.7 million, decreased by 12.0% when compared to the first quarter of 2022 and decreased by 20.6% when compared to the second quarter of 2021 due mainly to the decrease in gains (losses) on financial instruments measured at fair value through profit or loss, gains on investments and dividend income.
In the 6-month period of 2022, net non-interest income amounted to Baht 951.9 million, decreased by 18.0% when compared to the 6-month period of 2021 due mainly to the decrease in gains on investments and dividend income.
Other Operating Expenses
In the second quarter of 2022, other operating expenses amounted to Baht 867.7 million, increased by 2.8% when compared to the first quarter of 2022 due to the increase in advertising and promotional expenses and by 12.9% when compared to the second quarter of 2021 which was the increase in employees' expenses and advertising and promotional expenses.
In the 6-month period of 2022, other operating expenses amounted to Baht 1,712.1 million, increased by 10.9% when compared to the 6-month period of 2021 due to the increase in employees' expenses.
Profit from Operations Before Expected Credit Losses and Income Tax
In the second quarter of 2022, profit from operations before expected credit losses and income tax amounted to Baht 1,081.8 million, decreased by 2.2% when compared to the first quarter of 2022 and increased by 1.6% when compared to the second quarter of 2021.
In the second quarter of 2022, basic earnings per share stood at Baht 0.011 per share, decreased by 54.2% when compared the first quarter of 2022 and decreased by 52.2% when compared to the second quarter of 2021.
In the 6-month period of 2022, profit from operations before expected credit losses and income tax amounted to Baht 2,188.3 million, increased by 3.4% when compared to the 6-month period of 2021.
In the 6-month period of 2022, basic earnings per share stood at Baht 0.035 per share, decreased by 29.6% when compared to the 6-month period of 2021.
Table: Operating Results | (Unit: Million Baht) | ||||||||||||||||||||||||||||||||||||
Items | Quarter | Variance | Quarter | Variance | For 6-month periods | Variance | |||||||||||||||||||||||||||||||
2/2022 | 1/2022 | (%QoQ) | 2/2021 | (%YoY) | 2022 | 2021 | (%YoY) | ||||||||||||||||||||||||||||||
Interest income | 2,069.3 | 2,003.2 | 3.3 | 1,874.5 | 10.4 | 4,072.5 | 3,722.0 | 9.4 | |||||||||||||||||||||||||||||
Interest expenses | (565.5) | (558.5) | 1.3 | (602.5) | (6.1) | (1,124.0) | (1,221.7) | (8.0) | |||||||||||||||||||||||||||||
Net interest | 1,503.8 | 1,444.7 | 4.1 | 1,272.0 | 18.2 | 2,948.5 | 2,500.3 | 17.9 | |||||||||||||||||||||||||||||
income | |||||||||||||||||||||||||||||||||||||
Management Discussion and Analysis for the Second Quarter ended 30 June 2022 | Page 5/20 |
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LH Financial Group pcl published this content on 18 July 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 18 July 2022 13:23:01 UTC.
