Goldman Sachs Says Thai Banks Have Not Fully Recovered as Asset Quality Remains Concern

Goldman Sachs believes that Thai banks are not yet fully recovered despite having strong net interest margins (NIMs) in the second quarter, given the quality of their assets continues to be concerned.

With TTB and BBL exceeding Goldman’s expectations, SCB X and KTB meeting expectations, and KBANK falling short, the 2Q23 earnings for Thai banks were seen as mixed. 

The 2Q23 results for Thai banks show an increase in profits of 6% QoQ and 23% YoY, driven by an increase in NIM due to the successful pass-through of rate hikes into higher loan yield. The banks’ non-interest income increased due to higher trading gains, while the CIR remained basically unchanged.

But most banks saw slowing loan growth in the second quarter, and asset quality was still an issue as credit costs rose.

Goldman Sachs forecasts that loan growth will continue subdued and credit costs will remain elevated in the near future, but that forthcoming rate hikes will increase NIMs, alleviating some of the forthcoming pressures.

For an investment strategy, Goldman Sachs recommends “Sell” on KBANK and SCB X, but maintains “Buy” on TTB, and “Neutral” on BBL and KTB.