Thailand’s banking sector is bracing for a challenging second quarter in 2025, with expectations of a 9% year-on-year drop in earnings driven by rising credit costs and diminished pre-provisioning operating profits. According to UOB Kay Hian (UOBKH), the banks under its analysis are likely to report a combined net profit of about $1.47 billion (THB 48.6 billion), reflecting a notable decline of 9% year-over-year and 17% quarter-on-quarter.
Analyst Thanawat Thangchadakorn highlighted that excluding provision expenses, pre-provisioning operating profit is projected to experience a decline of 9% year-on-year and 11% quarter-on-quarter. The anticipated uptick in credit costs during Q2 compared to Q1 is expected to range from 11 to 151 basis points.
Among individual lenders, Kiatnakin Phatra (KKP) is forecasted to see an increase in credit costs, largely due to the uneven recovery in the automotive market. Meanwhile, SCB X is also predicted to report heightened credit costs as a precautionary measure in provisioning.
Additionally, Tisco Financial Group is expected to follow suit with rising credit costs, having previously set a 2025 target of 100 basis points for credit expenses. Banks are advised to adopt a more cautious lending approach to preserve asset quality, as emphasized by Thangchadakorn.
With the banking landscape evolving, who knows? Perhaps we’ll see a renaissance in creative financial products that actually excite consumers!
What is the projected profit decline for Thailand’s banking sector in Q2 2025?
The banking sector is expected to experience a 9% year-on-year decline in earnings, resulting in a combined net profit of approximately $1.47 billion.
Which banks are expected to increase their credit costs?
Kiatnakin Phatra, SCB X, and Tisco Financial Group are all anticipated to report higher credit costs due to various market conditions and cautious provisioning strategies.
How are banks expected to adjust their lending practices?
Banks are likely to adopt a more cautious approach to lending in order to maintain strong asset quality amidst rising credit costs.
