Broker Maintains “Overweight” Rating on Banking Sector on Earnings Outlook in 3Q22

Krungsri Securities continues to maintain a “Overweight” rating on the banking sector, with SCB (TP THB155) and KTB (TP THB21) as top picks, due to expectations that aggregate earnings will rise both QoQ and YoY in 3Q22 thanks to a mix of loan book expansion and normalizing ECL.

The broker anticipates a 4% quarterly and 29% annual increase in banking sector earnings to THB43 billion in the third quarter of 2202. QoQ growth should be propelled by a mix of growing the loan book and bringing ECL back to normal. Meanwhile, a low base year-over-year increase in earnings is expected to drive strong growth (high provisions during lockdowns in mid-2021). The solid growth in loans during the quarter should help BBL achieve the highest earnings growth QoQ at 25%. With a smaller loan book and lower non-NII, KTB may report its strongest yoy earnings growth of 49% in 3Q22, but profits may fall 10% quarter over quarter.

The banking sector should benefit from more pronounced economic recovery in 2023 driven by stronger demand for loans, NIM recovery, and improving asset quality outlook.