Maybank says Thailand’s banks are resilient to bank debt issues in the US and EU, citing their strong capital and liquidity positions, and ranks BBL and KKP as Top Pick stocks in the sector.
Considering the domestic economic recovery, the banks’ positive exposure to the interest rate increase, and their attractive valuations, Maybank Securities (Thailand) (MST) has kept its “Positive” outlook on Thai banks. According to the brokerage, Thai banks’ solid capital and liquidity positions meant that bank debt issues in the US and EU had no significant effect on their earnings and capital.
Maybank is also unconcerned about the AT-1, a Tier I instrument for banks, since the sector Tier-1 ratio was 16% in 2022, with a capital adequacy ratio of 19.4%, compared to the BOT’s requirements of 9.5% and 12%.
In 2022, the average NPL coverage ratio for Thai banks was 172%, indicating that they had large reserves and good asset quality. Also, the majority of loans are secured by some kind of collateral. Unsecured loans account for only about 5% of the total. With an expected ROA for the sector of 1.0% in 2022, Maybank analysts believe that problems in Europe and the U.S. are unlikely to have a detrimental effect on the capital of Thai banks.
Meanwhile, KGI Securities (KGI) saw concern over AT-1 in Europe’s financial market would have limited impact on Thai banks that issued this instrument internationally. Kasikornbank (SET: KBANK), Bangkok Bank (SET: BBL), Krung Thai Bank (SET: KTB), and TMBThanachart Bank (SET: TTB) issued AT-1 as a booster to Tier I at around 1% of the total Tier 1. However, even taking AT-1 out of Tier I, CET1 alone remains prudent at all banks at >15% (vs. minimum of 8%), which is considered safe and sound.
