The final two quarters in 2025 would be crucial to Thailand amid challenging economic headwinds from Trump’s tariffs, declining consumer consumption and slower tourist arrivals dragging down the kingdom’s growth engine.
Brokers in the market remain cautious on listed companies within the Thai banking sector as their financial performance would be pressured by heightened expected credit loss (ECL) provisions, a contraction in net interest margin (NIM), and a steep decline in capital market-related fee income.
Krungsri Securities estimates that the banking sector (seven major banks) will report a 2Q2025 net profit of THB 51.5 billion, marking a 4% decline year-on-year (YoY), primarily due to a drop in net interest income (NII). On a quarter-on-quarter (QoQ) basis, net profit is forecasted to plunge as much as 12%, influenced by a lower NIM resulting from policy rate cuts, a shift in loan expansion toward lower-risk segments, and interest burden alleviation measures for debtors under the “Khun Su Rao Chuay” (You Fight, We Help) scheme. Total loan volume is projected to fall by 0.3% QoQ, mainly attributed to declining SME and retail lending.
Non-interest income (Non-NII) has also deteriorated, pressured by weaker investment returns and a sharp drop in capital market fee income, coupled with increased ECL due to softer asset quality. The sector’s NPL ratio is expected to rise to 3.76% from 3.68% in 1Q2025, reflecting weaker debt repayment ability among borrowers amid an uncertain economic recovery.
Similarly, Daol Securities (Thailand) anticipates the sector’s aggregate net profit at THB 53 billion, down 2% YoY and 10% QoQ, mainly due to lower NIM and falling investment gains. Loans in the quarter are forecasted to contract 0.8% YoY and 0.2% QoQ, with year-to-date (YTD) loan growth at -1.2%, as a result of softness in large corporate and SME loans. The NPL ratio has edged up slightly to 3.18% from 3.17% in 1Q2025, still considered manageable.
2025 Full-Year Earnings Expected to Exceed THB 200 Billion
Krungsri Securities projects that for full-year 2025, managing asset quality—including credit cost and NPLs—will be the primary issue to watch. Current asset quality remains controllable, and the brokerage forecasts net profit this year will reach THB 204 billion, down 5% YoY. The main pressure comes from NII, with NIM expected to contract further as the policy rate is projected to drop in three increments of 0.25% each, ending at 1.50% for the year. Additionally, banks’ heightened focus on lending to lower-risk segments and the implementation of interest relief for borrowers under “Khun Su Rao Chuay” will contribute to weaker NII. Overall loan growth is expected to shrink by 0.4% YoY, given stricter lending standards and a focus on higher-quality customers.
Daol Securities (Thailand) forecasts banking sector net profits for 2025 and 2026 at THB 211 billion and THB 217 billion, respectively. This represents a decrease of approximately 2% due to lower NIM, but a 3% increase respectively due to reduced provisioning expenses, assuming one additional 0.25% policy rate cut by the Bank of Thailand’s Monetary Policy Committee (MPC) to 1.50% in the second half of the year.
Top Banking Sector Picks
Krungsri Securities views the banking sector as a “Value Play,” with Kasikornbank PCL (SET: KBANK) and Krung Thai Bank PCL (SET: KTB) selected as top picks, citing expectations for high dividend yields in the range of 6-9% per annum.
Daol Securities (Thailand) assigns an “Overweight” stance to the sector, preferring banks with strong growth outlooks. Kiatnakin Phatra Bank PCL (SET: KKP) is favored due to reduced losses from repossessed vehicles and lower ECL, benefiting from the “You Fight, We Help” initiative. KTB (target price THB 25) is also maintained as a top pick as its NPL and provisioning trends outpace the sector, with a strong focus on government-related lending and the potential for a future share buyback program.
