KGI Securities (Thailand) maintained a ‘Neutral’ stance on the Thai banking sector, observing increased system-wide liquidity in October 2025. Deposits across the sector rose 0.8% month-on-month and 0.5% year-to-date, while loans contracted at a faster pace, down 1% month-on-month and 5% year-to-date, leading to lower loan-to-deposit ratios (LDRs) for most banks.
Krungthai Bank (KTB) reported the highest deposit growth with a 4.4% month-on-month and 5.8% year-to-date increase. Kasikornbank (KBANK) and Bangkok Bank (BBL) posted moderate deposit gains, while Siam Commercial Bank (SCB) and TMBThanachart Bank (TTB) saw declines, aligning with strategies to manage liquidity as loan demand contracts.
The declining trend in loans is attributed to banks’ cautious stance on higher-risk lending. Instead, excess liquidity fueled money market lending to large corporates and state enterprises, with this segment up 3.5% month-on-month and 2% year-to-date. KTB notably expanded its money market lending by 39% month-on-month and 92% year-to-date, while other banks gradually increased their fixed-income holdings in response to prevailing low yields.
Fixed-income investment saw its second month of growth, up 3.8% month-on-month and 22% year-to-date system-wide. KTB led this trend with a 9% month-on-month and 25% year-to-date increase in its fixed-income portfolio, followed by significant gains from TTB and Tisco Financial Group (TISCO). This pivot toward fixed income reflects banks’ focus on liquidity management and preparation for potential policy rate cuts, taking advantage of softer bond yields.
KTB’s net interest margin may face pressure from increased low-yield lending, but this is likely to be balanced by reduced credit costs as the bank builds its low-risk loan segment. KTB remains KGI’s top sector pick, with KBANK also favored for its dividend and ongoing efforts to reduce costs and improve profitability.
