Krungsri Securities (KSS) has revised its outlook for the Thai consumer finance sector, downgrading its investment recommendation from ‘Bullish’ to ‘Neutral’ amid renewed asset quality concerns. The ongoing conflict in the Middle East has led to higher oil prices, which in turn are elevating production, transportation, and food costs in Thailand.
These increases are squeezing household purchasing power and impairing the ability of borrowers to service their debts, prompting a more cautious sector view.
Current valuations, at around 1x forward price-to-book value (PBV), already reflect some of these asset quality headwinds, with pricing at -1.5 standard deviations from the historical average.
In the current environment, Krungsri expresses a preference for financial institutions featuring strong balance sheets, high non-performing loan (NPL) coverage ratios, and a borrower base that is largely salaried, as these characteristics offer more resilience against economic shocks.
Krungsri has removed Muangthai Capital (MTC) from its top pick list, retaining only Krungthai Card (KTC). The decision comes as MTC’s core business revolves around vehicle title loans serving credit-underserved borrowers, many in the agricultural sector who are directly exposed to higher oil prices and their impact on household economics.
By contrast, KTC is viewed more favorably due to its robust balance sheet—boasting an NPL coverage ratio of 425%—and expectations that its 2026 net profit will set a new record. KTC also offers an attractive dividend yield of about 5% and is expanding into insurance distribution, which Krungsri expects will provide a new avenue for revenue growth.
Consequently, the brokerage has revised down its sector net profit forecasts for 2026 and 2027 by 4–7% per annum, with the 2026 forecast now at THB 23,844 million and 2027 at THB 24,669 million.
These adjustments reflect expectations of higher credit costs and more subdued loan growth under current economic conditions. Sector net profit in 2026 is now projected to grow by just 1% year-on-year, supporting a more cautious sector stance.
