Thai banks to reduce credit costs towards Q4: analyst

Earnings rise of 2% on average expected for Q3.

Thai banks are expected to continue reducing their credit costs towards Q4 2024, according to UOB Kay Hian.

Earnings are likely to see net profit rise by around 2% year-on-year in Q3, although slightly lower compared to Q2. Funding costs are estimated to rise by 6bp over the same period of comparison.

Some banks said that funding costs will approach the peak level soon, said UOBKH analyst Thanawat Thangchadakorn.

The banking sector’s asset quality should also improve as fund inflow drives growth in the sector, especially for big banks, according to Thangchadakorn.

Banks may opt to give out more loans in the last six months of 2024. However, the banking sector’s loan growth will rise at just around 1% year-on-year during the year.

“We reckon that banks will ease their lending policies, due to a better economic outlook in H2 2024. We also saw an acceleration in government disbursement of the investment budget,” Tangchadakorn said.

As of 20 September, 57% of the investment budget had been 57% utilised. UOBKH said. Utilisation of the investing budget reportedly averaged 62% between 2016 to 2023. 

“As the government disbursement in the investment budget is near the historical 
on average, we should see an economic recovery as a result of government investing,” Tangchadakorn said.