Kiatnakin Phatra Securities (KKPS) expects Thai banks under its coverage to report weaker headline earnings for 3Q26, mainly due to a high comparison base from gains booked a year earlier. However, the broker said underlying operating trends should remain broadly steady, supported by stabilizing margins, recovering loan demand and manageable asset quality.
The research house forecasts combined net profit of Bt51 billion for the six banks it covers, representing a decline of 15% year-on-year and 4% quarter-on-quarter. KKPS attributed much of the annual drop to elevated fair-value-through-profit-and-loss and investment gains in 3Q25, rather than deterioration in core banking operations.
Excluding those gains, sector pre-provision operating profit is projected to fall by a mid-single-digit percentage year-on-year while staying largely flat from the previous quarter, despite pressure from lower net interest margins.
KKPS expects sector net interest margin to hold broadly unchanged quarter-on-quarter at 2.66% in 3Q26, supporting its view that 2Q26 marked the bottom of the current easing cycle. While lending yields are likely to continue softening as banks shift toward lower-yielding government and corporate loans, lower deposit costs are expected to offset most of the pressure.
On an annual basis, NIM is still estimated to be 31 basis points below the prior-year level, reflecting the higher interest-rate environment in early 2025. The broker noted that most of the impact from rate cuts had already been absorbed by 2Q26, reducing the likelihood of further sharp margin compression from this point.
Loan growth is also expected to improve, driven by government and corporate borrowing. KKPS forecasts sector loans to rise 0.1% quarter-on-quarter and 4.3% year-on-year in 3Q26. Net fee income is expected to remain supportive, with a 4% year-on-year increase helped by wealth management and capital market-related activities, though growth should slow from the strong pace seen in the first half due to a higher base.
Asset quality is expected to remain under control as the period of heavy provisioning eases. The broker estimates sector credit costs at 1.26% in 3Q26, down from 1.32% in 2Q26 and 1.47% in 3Q25. The non-performing loan ratio is projected to improve to 3.53%, helped by loan expansion, while reserve coverage is expected to stay solid at 204%.
KKPS expects the recent flooding, which occurred close to the end of the quarter, to have only a limited effect on 3Q26 results. However, repayment pressure among affected borrowers remains a risk to monitor in 4Q26.
Among its Buy-rated names, KKPS highlighted TMBThanachart Bank as the most resilient earnings performer for the quarter, with profit expected to increase 2% year-on-year. For larger banks, earnings are generally expected to decline from last year, largely due to the high base created by investment-related gains in 3Q25.
The broker said 3Q26 results are unlikely to materially alter the investment outlook for the sector. Following strong year-to-date performance and the end of the interim dividend season, the absence of near-term catalysts could leave bank shares vulnerable to profit-taking and sector rotation.
