[BANGKOK] Thailand’s second-largest lender Kasikornbank abandoned a key earnings target on concerns that the already weak economy may deteriorate further, denting loan demand and increasing defaults.
The commercial lender is unlikely to fulfil the pledge it made to investors to increase return on equity (ROE) to at least 10 per cent by the end of 2026, according to chief executive officer Kattiya Indaravijaya. The bank is exercising “much more prudent” business practices as the local economy has to grapple with US tariffs, border dispute and political instability, she said in an interview in Bangkok on Monday (Sep 1).
“Thai economic outlook is much weaker than we previously expected with several negative news,” Kattiya, the only female CEO in Thailand’s banking industry, said. “We are more in the defensive mode with focus on high-quality loans and bad debt controls.”
Kattiya has good reasons to worry about the bank’s performance, as Thailand is grappling with a weakening economy and political turmoil. Rising US tariffs hurt the country’s exports, while tourism, a significant national revenue booster, is not attracting as many visitors as before.
The Constitutional Court dismissed Paetongtarn Shinawatra last week as prime minister for ethical misconduct, raising concerns that key policies to bolster the economy may be delayed. Growth slowed to 2.8 per cent during the second quarter, from more than 3 per cent in the preceding period.
The bank’s ROE is already among the lowest in Thailand and South-east Asia, with average ratio at 10 per cent and 14 per cent, respectively, as shown by Bloomberg-compiled data.
BT in your inbox
Start and end each day with the latest news stories and analyses delivered straight to your inbox.
Its ROE fell to about 8.9 per cent in the April to June period from 9.7 per cent a year ago as net income dropped 3.2 per cent, according to its financial report. It attributed the results primarily to a decline in net interest income amid slowing loan demand and lower interest rates. The shares have gained around 10 per cent so far this year versus a 9.3 per cent slump in the benchmark SET Index.
Kasikornbank, ranked No 2 in terms of total assets, will increase its focus on boosting fee income from bancassurance and wealth management business to counter the slowing loan demand, according to Kattiya. Lower interest rates will add more pressure on the bank’s net interest margin, but cheaper borrowing costs will probably help improve borrowers’ payment ability, she said.
Kasikornbank and its peers trimmed their lending rates after the Bank of Thailand last month slashed the benchmark policy rate to the lowest in more than two years. Economists now see higher odds of steeper interest rate cuts as the central bank tries to shield the economy from further political risks.
The company also pins hope on its online banking platform to support business, expecting it to be able to compete with three new virtual banks that will start operating in 2026, according to Kattiya. The lender has several units that already offer financial services to underserved individual customers, the main target of the new competitors, she said. BLOOMBERG
