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16 Jul 2021

Financial Institutions

Bank Operating Performance 2Q21 Lower net profit compared to previous quarter; increased provisioning in anticipation of prolonged COVID-19 crisis (Business Brief No.3939)


KResearch expects that the overall performance of Thai commercial banks in 2Q21 may see an increase in net profit over-year since the economy was hit by the first wave of COVID-19 in 2Q20. However, net profit in 2Q21 may dip to a mere THB 34.8 billion, against the THB38.7 billion that was registered in 1Q21. The drop can be attributed to the third wave of the pandemic, which has put renewed pressure on the economy as a whole, and consequently affected the income of commercial banks' core businesses. Thus,  banks must set aside higher loan loss provision.

Looking towards the NPLs within Thailand's  banking sector, while commercial banks continue to benefit from the Bank of Thailand (BOT)'s leniency in asset classification – especially in terms of expedited debt restructuring for their loans – the present economic slump has slashed the earnings of both retail and business customers across many sectors over a long period of time. Therefore, KResearch projects that the commercial banking sector's NPL ratio in the banking system could inch up to a range of 3.15-3.25 percent of total loan in 2Q21, from 3.10 percent  in 1Q21. Close attention should still be paid to signals of deterioration of SME and retail loan portfolios, including housing loan, credit card loan and unsecured personal loan.

KResearch perceives that the maintenance of commercial banks' operating performance in 2H21 will remain a major challenge as the overall economic environment is still dependent on efforts to suppress the COVID-19 outbreak, expedited vaccines procurement and distribution, and timely relief programs to support sectors that have been shattered by the COVID-19 crisis. The immediate mission for Thailand's financial institutions will likely be to accelerate assistance measures for crisis-hit clients, especially SME businesses and retail customers that operate within the 10 provinces under maximum and strict control. According to BOT data, loans given to those two groups in the abovementioned 10 provinces accounted for approximately 31.9 percent of total loans in the Thai banking system, as of the first quarter of 2021. ​

Financial Institutions