Krungsri Securities (KSS) shared with Kaohoon that, in response to Bloomberg Intelligence’s negative outlook on Kasikornbank (KBANK) for the second half of the year due to concerns over the quality of loans in the small and medium-sized enterprise (SME) segment, the overall condition of the Thai commercial banking sector remains robust.
There are increasingly clear signs of economic recovery in Thailand, supported by a resurgence in activity among large businesses and a renewed investment cycle. In particular, the influx of foreign direct investment, aimed at positioning Thailand as a regional data center hub, has contributed to a 2% growth in overall bank lending during the first half of the year—an outcome that surpassed market expectations. The expansion led by large enterprises is anticipated to gradually trickle down to the SME and retail segments in the coming periods.
Furthermore, Thai commercial banks have maintained high provisioning levels over the past three to four years, resulting in a robust buffer against potential risks. The sector’s Tier 1 capital ratio also remains higher than that of many regional peers. Given these strengths, investment-led economic momentum is expected to further support loan growth and fee income from wealth management services.
At present, banking stocks in Thailand are trading at a price-to-book value of 0.99x. Krungsri assesses there is potential for this to rise to a range between 1.2x and 1.4x.
The asset quality, as reported in the recent Q2 financial results, is deemed solid. This reinforces Krungsri’s view that banking stocks should continue to outperform the broader market, with KBANK and Krung Thai Bank (KTB) highlighted as top picks. This outlook is also aligned with ongoing net foreign buying in the banking sector.
Regarding dividends, the outlook for Thai banks remains positive. Payouts are projected to stay at elevated levels, with additional upside on potential increases in the banks’ payout ratios, further supporting the sector’s return on equity.
Similarly, Innovest X Securities (INVX) does not share the negative view on KBANK presented by Bloomberg Intelligence. Compared to other banks in the sector, INVX sees KTB and Bangkok Bank (BBL) as safer and more attractive investments.
From the perspective of foreign investors, sentiment toward Thai banking stocks is considered neutral at present. International investors show a greater preference for shares in hospitals, utilities, and tourism-related companies. Either clearer signs of economic recovery or a correction in bank stock prices are considered before increasing allocations.
Going into the second half of the year, there is potential for renewed foreign capital inflows, particularly if the Thai baht continues to strengthen, according to the analyst.
Stocks expected to benefit most from foreign capital inflows include Advanced Info Service (ADVANC), Airports of Thailand (AOT), Bangkok Dusit Medical Services (BDMS), KTB, BBL, Gulf Development (GULF), and CP All (CPALL).
Bualuang Securities (BLS) also pointed out that, looking ahead to the second half, significant foreign inflows can be expected when comparing the current return of foreign funds to historical outflows over past years, indicating a wide gap that remains to be filled.
The brokerage sees commercial banks as especially attractive due to their solid fundamentals and relatively low volatility. Furthermore, the high dividend yields typical of this sector are a key attraction for foreign investors in the Thai equity market.
