FSS International Investment Advisory Securities (FSSIA) wrote that Krung Thai Bank Public Company Limited (SET: KTB) recorded a net profit of THB 12.1 billion in the second quarter of 2026. This result exceeded both FSSIA’s and the market’s expectations by 8%. Although the figure declined by 2.5% quarter-on-quarter, it increased by 9% year-on-year.
The main supporting factors included higher-than-expected net interest income (NII), stronger growth in loans, and a robust net interest margin (NIM). Additionally, operating expenses were lower than anticipated, offsetting weaker-than-expected non-interest income, while fee income came in line with projections.
KTB’s overall asset quality remained solid as expected, resulting in a first-half 2026 net profit of THB 24.6 billion, a 7.6% year-on-year growth and accounting for 52% of FSSIA’s full-year profit estimate. FSSIA has maintained its earnings forecasts for 2026-2028 and reiterated a ‘Buy’ recommendation.
The 2026 target price was raised to THB 47.30 from THB 36.40, based on a GGM approach using a PBV of 1.39x (up from 1.07x), an unchanged long-term ROE assumption of 10.2%, and a reduced cost of equity of 7.6% (down from 9.6%). KTB is currently trading at a PBV of 1.2x, suggesting an 11% upside and a projected average dividend yield of 5% per year.
Pre-provision operating profit stood at THB 22.9 billion, down 5.1% quarter-on-quarter and 1.3% year-on-year. This was pressured by an 11.3% quarter-on-quarter decline in non-interest income, although this improved by 7.1% year-on-year.
Fee income was THB 6.14 billion, a slight 0.9% decline quarter-on-quarter but up 10.3% year-on-year, with fee income from wealth management continuing to grow on a quarterly basis. In the first half of 2026, total fee income rose 12.1% year-on-year, mainly due to growth in wealth management services and credit card fees—exceeding both KTB’s single-digit target growth and FSSIA’s estimate of a 3% year-on-year increase.
NII reached THB 23.3 billion, surpassing expectations, although it was down 0.8% quarter-on-quarter and down 13.5% year-on-year, which was attributed to a late Q1 interest rate cut that was fully realized this quarter. The NIM stood at 2.46%, stable quarter-on-quarter and above FSSIA’s estimate of 2.29%.
Although loan yields were affected by the rate cut, lower funding costs—helped by the redemption of $600 million in high-cost Additional Tier 1 bonds at the end of Q1—support NIM. For the first half, NIM was 2.50%, matching the bank’s target of 2.35-2.50% and higher than FSSIA’s expectation of 2.43%.
Loan growth in the second quarter outperformed expectations, expanding 1.2% quarter-on-quarter (compared to an expected 0.6% contraction), 5.1% year-on-year, and 3.6% year-to-date—exceeding KTB’s full-year target of 0-2% as well as FSSIA’s 2% forecast. This growth was broad-based across large corporates, the public sector, SMEs, and retail segments, while the bank maintained prudent credit quality standards.
Operating expenses declined more than expected, down 5% quarter-on-quarter and 14.1% year-on-year, mainly due to lower employee costs and asset impairment expenses. However, the decrease in total income kept the cost-to-income ratio stable at 38.9%. For the first half of the year, the ratio remained at 38.9%, lower than KTB’s target range of 40% and FSSIA’s estimate of 41.7%, as expenses are expected to accelerate over the rest of the year.
Asset quality remained robust, with gross NPLs stable quarter-on-quarter but down 1% year-on-year. The growing loan base reduced the NPL ratio to 3.34% from 3.37% in Q1, below FSSIA’s 2026 estimate of 3.46%. Expected credit loss expenses also declined slightly more than anticipated.
Credit cost stood at 0.95%, down from 1.14% in Q1, keeping the coverage ratio steady at approximately 202%. For the first half, credit cost averaged 1.05%, within the bank’s 0.75-1.15% target range, and above FSSIA’s forecast of 0.90%.
