KResearch expects that net profits of domestically-registered commercial banks will reach THB32.5-33.5 billion in 3Q21, declining from the THB57.2 billion reported for 2Q21 because the resurgence of COVID-19 in early 3Q21 may dent their core business income, particularly fees and service income, thus causing them to incur higher provision expenses than those seen during a normal period and in 1H21.
Due to the severe and broad-based impact of COVID-19 on financial positions of several borrower segments during 3Q21, KResearch assesses that many commercial banks will gradually set aside higher provisions than during a normal period in order to brace for risks that may stem from asset quality issues, which must be monitored closely over the near term. Regarding NPLs in the Thai commercial banking system, KResearch expects that they will increase to 3.10-3.17 percent of the total loans during 3Q21.
Looking ahead, KResearch is of the view that commercial banks will be able to make adjustments to ensure that their 4Q21 profits are higher than that recorded during 4Q20. Although the Thai economy has begun to exhibit improving signs in 4Q21, recovery is expected to be uneven across economic/business sectors. Therefore, commercial banks must ensure that they have adequate liquidity to support the business sector to bounce back when intertest rates will remain relatively low over the coming quarters. This should be undertaken concurrently with speedy debt restructuring efforts and provision of relief measures for borrowers, especially those who are still unable to get back on their feet as fast as others. Such moves may serve as another guideline to manage their asset quality issues that they will continue to encounter during 2022. Another challenge that commercial banks will experience next year is increased competition in the financial service market due to the proliferation of players.