Thai banks face shrinking margins, ballooning costs amidst economic woes: analyst

Thailand can’t rely on tourism to buoy reserves.

Thai banks–notably Bangkok Bank, Kasikornbank, TMBThanachart Bank, Siam Commercial Bank, and Krung Thai Bank–are all headed for a tougher time as Thailand records lower economic growth compared to other emerging markets in Asia, according to a report by market researcher CreditSights, a Fitch Ratings service.

“The Thai economy faces a large number of challenges, and we expect both margin shrinkage and a spurt in credit costs at the banks,” warned CreditSights analysts Pramod Shenoi, Lim Ze Hao, and Yustina Quek in the report, despite acknowledging the banks’ strong loss absorption.

“We are changing our recommendation on SCB, KBank, TMBThanchart and Bangkok Bank to underperform from market perform, and on Krungthai Bank to market perform from outperform,” the analysts added.

Thailand’s dependence on greater tourist inflows to buoy its reserves won’t be enough.

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“Wiith China continuing to remain closed and the rising living and mortgage costs in much of the world affecting discretionary expenditure, we don’t anticipate much of a pick-up in tourism,” Shenoi, Lim, and Quek said.

High energy costs and the weaker Thai baht has led to a trade deficit of THB420b for the first seven months of 2022–the highest in 27 years. This number is before ongoing floods were taken into account.

CreditSights also noted the “likely to be” fraught political environment leading up to national elections in May 2023.

Recently, the Thai government has reportedly asked commercial banks to be cautious about passing rate hikes on to borrowers. Public sector banks have also been directed to not pass hikes on.