Thailand Banking Industry Report - 2015

October 5, 2015

This report profiles Thailand’s banking industry, discussing market trends between 2014 and June 2015, as well as the outlook for 2015. The report also highlights leading players in the sector including Siam Commercial Bank PCL, Bangkok Bank PCL, Kasikorn Bank PCL, Krung Thai Bank, and Bank of Ayudhya PCL.

The stability of Thai commercial banks was maintained in 2014, despite showing a little slack due to the internal political unrest as well as slight deterioration in the quality of consumer loans and a decrease in lending growth. Yet, Thai commercial banks have been growing steadily because of the expansion of up-country provinces economy and urbanization trend; the investment to support business opportunity in the upcoming AEC market; and high provisions and capital fund that help cushion economic volatility.

Total assets held by financial institutions in Thailand stood at THB 22.57tn as of July 2015, up 4.8% y/y. Commercial banks represented 75.1% of the banking industry, with Bangkok Bank remaining the key dominant player in terms of total assets. Meanwhile, banking loans growth dropped to 4% in Dec 2014, compared to 9% in Dec 2013. The growth mostly stemmed from SMEs loan expansion, while consumer loans grew at a slower rate in line with lower economic growth, which prompted loan-to-deposit ratio to decline to 108.5% in June 2015, from 111% in the same period last year. Nonetheless, banks generally have had ample buffer capital for expected losses as capital ratios remained strong in 1H/2015, signifying a solid financial position for banks in Thailand.

Going forward, credit card lending will continue to register strong growth as a result of aggressive card promotional campaigns. Also, further consolidation is expected amongst the domestic financial institutions to enhance efficiency amid intense competition. Commercial banking business in 2015 is expected to continue to fare well with the distinctiveness of stability, strong capital funds and a boost with the Thai government’s stimulus package. However, downside risks stem from delays in government investment and asset quality deterioration due to the slow recovering economy.

Key Points:

• The Thai banking system recorded lower net profit of THB 53.5bn and ROA of 1.3% in Q2/2015 while capital position still remained high.

• Loan quality slightly deteriorated, evidenced by a marginal increase in NPL ratio to THB 311.6bn or 2.38% in June 2015.

• In 2015, big banks should outperform small banks in terms of loan and earnings growth, while most banks should report higher NIM on lower funding costs.

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