What To Know
- Banks are already preparing for the potential fallout of declining net interest income (NII), weak loan demand, and global macroeconomic tremors—especially in response to Trump-era fiscal policy reversals and US interest rate cuts.
- Thailand’s banks now face the dual pressure of a decelerating domestic economy and external headwinds such as US tariffs on Thai exports.
Bangkok Business News: Mixed Results in First Half Mask Growing Pressures
Thailand’s commercial banks collectively reported a net profit of 66.2 billion baht for Q2 2025, reflecting a 2.97% drop from the prior quarter. While the first half of the year still showed a slight year-on-year increase of 3.97%, rising to 134.5 billion baht, a closer look reveals deepening concerns. This Bangkok Business News report highlights that bad debt provisions surged to 57.6 billion baht in the second quarter alone, signaling caution among lenders despite headline profitability.
Banks in Thailand are reporting a dip in profits
Image Credit: AI-Generated
Banks are already preparing for the potential fallout of declining net interest income (NII), weak loan demand, and global macroeconomic tremors—especially in response to Trump-era fiscal policy reversals and US interest rate cuts. These trends are now expected to hit Thailand’s financial system with full force in the third quarter.
Divergent Bank Performances Raise Sector Volatility
While a few players such as SCB X Group and Bangkok Bank posted healthy profit growth—SCB X rising 18.7% year-on-year to 25.2 billion baht and BBL up 9.5%—others struggled. Kasikornbank recorded the highest absolute profit of 26.2 billion baht but still showed a year-on-year decline of nearly 1%. TMBThanachart Bank, Krungthai Bank, and Krungsri also reported either stagnant or falling earnings.
The biggest challenge is credit quality. Non-performing loan (NPL) ratios hovered around 3.2% to 3.3% across major banks, with some financial institutions increasing coverage ratios to buffer against possible loan defaults. Banks are responding by tightening lending, which, while protective in the short term, may further choke loan growth that already fell by 0.97% from the end of 2024.
Investment Gains and Cost Cuts Drive Temporary Upside
Despite weak core lending income, some banks beat market expectations due to gains from investments and lower operational expenses. Analysts note SCB outperformed by 17%, KKP by 26%, and TISCO by 6%, largely because of disciplined cost control and strong investment returns. However, these advantages are not expected to carry into Q3, as credit costs rise and economic indicators worsen.
Net interest income for the six largest systemically important banks dropped by 6.57% year-on-year to 327 billion baht, emphasizing just how critical the rate environment and weak borrowing appetite have become. Only BBL managed slight loan growth of 0.73%, while others saw contractions.
Economic Pressures Mount for Second Half of 2025
Thailand’s banks now face the dual pressure of a decelerating domestic economy and external headwinds such as US tariffs on Thai exports. According to K-Research, Thai GDP growth for 2025 is forecasted at a tepid 1.4%, with total loan growth expected to shrink by 0.6%. Banks are adjusting expectations accordingly, bracing for higher credit losses and lower lending volumes.
While some have leaned into digital transformation and debt relief initiatives to maintain long-term growth, the near-term forecast is one of caution. With the third quarter already signaling more pain from declining loan margins, tightened credit conditions, and external volatility, Thai banks must balance short-term prudence with long-term positioning in an increasingly uncertain financial landscape.
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