CGS International Securities (Thailand) (CGSI) maintained its “Neutral” view on the Thai banking sector, stating that the group lacks near-term catalysts, but still attractive with dividend yield.
The analysis cited the Bank of Thailand (BOT)’s recently released data on the Thai banking sector’s financial performance and asset quality for the third quarter of 2025 on November 18. According to the report, the sector saw a quarter-on-quarter rise in Stage 2 (underperforming) loan ratio to 7.24% in 3Q25, up from 6.88% in 2Q25. The Stage 3 (non-performing loan or NPL) loan ratio also edged higher to 2.94% from 2.91%.
This increase was attributed to loan contraction in large corporations, SMEs, credit cards, and unsecured personal loans. BOT noted that the higher Stage 2 ratio was mainly driven by qualitative reclassification of large corporate loans and upgrades of some customer loans from Stage 3 to Stage 2.
In retail lending, auto loans showed improved asset quality, with the Stage 2 ratio declining to 14.13% in 3Q25 from 14.35% in the previous quarter and Stage 3 loans down to 2.17% from 2.22%.
This improvement is attributed to stricter credit standards and higher-quality new loans over the past three years. The quality of housing loans remained stable, supported by the “You Fight, We Help” program, which allows qualified borrowers to suspend interest payments for three years with lower monthly installments before returning to regular payments.
The recent flooding that began in mid-November 2025 impacted eight southern provinces, with Songkhla being the hardest hit, affecting 2.73 million people. However, CGSI estimated that the flood-affected regions account for less than 1-2% of total loans in both banking and non-bank finance sectors.
Among key financial institutions under CGSI’s coverage, Krung Thai Bank PCL (SET: KTB) and Srisawad Corporation PCL (SET: SAWAD) have the largest presence in the South with 143 and 1,138 branches.
CGSI maintains a Neutral stance for the Thai banking sector, citing a lack of near-term catalysts but highlighting the appeal of high dividend yields. Thai banks are currently trading at 0.69x forward P/BV for 2026, slightly higher than the five-year average of 0.64x.
SCB X PCL (SET: SCB) and Kasikornbank PCL (SET: KBANK) are sector top picks, expected to post attractive annual dividend yields of 5.6-9.7% over 2026-27. Major downside risks include rising NPLs and policy rate cuts; key upside triggers are a boost in tourism, improved U.S. tariffs, and new government infrastructure projects.
For individual stocks, CGSI maintains a “HOLD” rating on Bangkok Bank PCL (SET: BBL) with a target price of THB 156 per share. The bank’s conservative approach to capital management means its payout ratio is expected to be around 40% for 2025F-27F (up from 36% in 2024), while its return on equity (ROE) is projected to ease to 7.0-7.9% in 2026F-27F from 8.5% in 2025F.
KBANK receives an “ADD” rating and a target price of THB 196 per share. There is potential upside to KBANK’s dividend payout assumption of 41-48% for 2025F-27F, given its robust balance sheet and a strong capital ratio of 20.9% as of 3Q25. Additionally, KBANK has commenced a share buyback programme valued at THB 8.8 billion running from November 2025 to May 2026.
SCB is also rated “ADD” with a target price of THB 151 per share. SCB stands out with the highest forecasted dividend yield—9.1-9.7% for 2026F-27F—among Thai banks under CGSI’s coverage. This is based on an assumed dividend payout ratio of 80% of net profit and strong ROE estimates of 10.0-10.4% during 2025F-27F.
