Thai banks sufficiently buffered against ongoing risks: Fitch

Escalation of the pandemic in Thailand will significantly affect business activity in H2.

Thai banks’ latest results show that it has retained sufficient buffers for ongoing risks, especially against the oncoming downsides expected in the second half of 2021, reports Fitch Ratings.

Thai listed banks’ operating profit and total assets improved slightly in the first half of the year to 1.2%, compared to only 0.9% in 2020: 0.9%.

The recent escalation of the COVID-19 pandemic in Thailand will significantly affect business activity, the ratings agency warned in a report. Meanwhile, the Bank of Thailand's regulatory relief measures will reduce asset-quality pressures on bank balance sheets until 2022.

However, Fitch believes that the banks retain reasonable buffers against the downside.

“Provisioning has remained high, with loan-impairment charges as a percentage of pre-impairment operating profit at 47% in the first half of 2021, compared to 2020: 53%; leading to loan-loss allowance coverage at 152% of impaired loans,” Fitch said in a report.

The banking sector's common equity Tier 1 was 16.3% as of May 2021, and Fitch expects these levels to be maintained.

Photo courtesy of Geoff Greenwood