Margin squeeze to hit Thai bank earnings

Loan growth holds up, but CGSI expects weaker profitability across eight lenders in Q2.

Thai banks are expected to report weaker second-quarter earnings as lower lending margins offset loan growth, according to CGS International.

The research house forecasts aggregate net profit of $1.69b (THB56.3b) for the eight banks under its coverage in the second quarter (Q2) of 2026, down 1.7% year on year (YoY) and 3.5% from the previous quarter.

It attributed the decline mainly to lower net interest margins following the Bank of Thailand's policy rate cut in the first quarter.

Aggregate net interest margin is expected to fall by 47 basis points year on year and nine basis points quarter on quarter.

Net interest income is projected to decline 11.4% from a year earlier and 2.1% from the previous quarter, the report noted.

Aggregate pre-provision operating profit is forecast at $3.41b (THB113.7b), down 3.5% YoY and 2.9% quarter on quarter (QoQ).

Loan growth is expected to remain positive, with aggregate loans projected to increase 1.7% YoY, 1% QoQ, and 2.3% from end-2025.

CGSI said growth will be supported by large corporate lending, credit cards, and unsecured personal loans.

Non-interest income is forecast to rise 10% YoY, driven by higher brokerage and asset management fees, as well as investment gains. On a quarterly basis, however, it is expected to decline 2.5%.

Asset quality is expected to weaken slightly. CGSI forecasts the aggregate non-performing loan ratio to rise to 3.76% in the second quarter from 3.63% in the first quarter, whilst the aggregate NPL coverage ratio is expected to edge down to 203% from 205.5%.

Based on May data, aggregate loan growth was flat from April, up 0.5% YoY and 1.6% from end-2025.

Kasikornbank and Kiatnakin Phatra Bank recorded the strongest monthly loan growth, whilst Krung Thai Bank posted the largest monthly decline.

CGSI maintained a neutral rating on the Thai banking sector.

It named SCB X and Kasikornbank as its top picks, citing their higher contribution from wealth management fees and projected dividend yields of 7.4% to 7.6% in 2026.