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20 Oct 2022

Econ Digest

The economic recovery after easing lockdowns supports banking business growth

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        KResearch views that the gradual recovery of economic activities after the easing of the lockdown will boost growth in core business income of commercial banks during 3Q22, both interest income and fee income. Loan growth for commercial banks registered in Thailand is projected in the range of 5.3-5.5%YoY, while the net interest margin (NIM) is projected to move up to the range of 2.72-2.75%, as a result of continued loan growth. Fee income is estimated to grow by 4.5-7.0% in 3Q22 due to a gradual recovery in domestic spending, especially as fees from high spending credit cards have risen to the pre-COVID-19 pandemic level.

        However, the fragility of the economic recovery could cause the ratio of non-performing loans (NPLs) to continue to rise in 3Q22, which will become a challenge that the commercial banks must actively address. Looking forward, the remained uncertain economic conditions could lead to a limited recovery of the core business income of commercial banks. Meanwhile, the interest rate hike of the banking sector in the next phase will depend on the timing of the policy interest rate hike, the business environment as well as the readiness to adjust banks’ contributions to the Financial Institution Development Fund (FIDF) in early 2023. These factors will result in declining support for the NIM, especially with the gradual increase in loan interest rates.

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