Margins will be pinched as interest-income gains are further limited, compounded by weak lending and bad debt
[BANGKOK] Four of Thailand’s largest banks are expected to post sharp declines in third-quarter net interest income as the nation’s persistently high household debt and weakening economy weigh on their business.
Thailand’s economy is lagging behind regional peers, leading the Bank of Thailand to lower its key interest rate to 1.5 per cent, a level only seen during major global downturns, such as during the pandemic.
“Thailand’s post-pandemic recovery has been weaker than that of regional peers, and economic prospects in 2025 and 2026 are likely to remain weak amid global uncertainties, adding pressure on banks,” Fitch Ratings said in an August note.
Household debt puts pressure on the ability of clients to repay loans, reducing banks’ “appetite for lending”, it said.
- Thailand’s largest lender SCB X is expected to post a 9.5 per cent decline in its third-quarter net interest income compared with a 6.7 per cent drop in the previous quarter.
- Bangkok Bank’s third-quarter net interest income is forecast to fall 8.5 per cent after a 4.3 per cent reduction in the second quarter.
- Kasikornbank will likely see a 9.5 per cent drop in third-quarter net interest income after a 6.7 per cent decline in the earlier quarter.
- Krung Thai Bank is expected to report a 12 per cent third-quarter decrease in net interest income after a 11 per cent drop in the previous period.
Banks will likely need to keep providing attractive deposit interest rates to remain competitive even as lower loan rates pressure interest income, Bloomberg Intelligence senior analyst Sarah Jane Mahmud said.
Margins will be pinched as interest-income gains are further limited, compounded by weak lending and bad debt.
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The banks, though, are well positioned to weather the downturn, Fitch said.
“Major Thai banks have acceptable buffers against substantial downside to asset quality,” it said. BLOOMBERG
