Counter tariffs are expected to hinder income growth for the Thai banking sector, which faces potential obstacles from U.S. counter tariffs, a research from Kasikorn Securities (KS) showed.
The Kasikorn Research Center (KResearch) has reduced its Thai GDP forecast for 2025 to 1.4% from 2.4%, amid concerns over U.S. tariffs at 37%. The subsequent policy shift by President Donald Trump suggests a base case GDP growth of 1.8–2.0%. Slower economic expansion is likely to dampen both loan demand and investment, particularly as banks remain cautious in expanding credit. In the worst-case GDP scenario, loan growth may turn negative. Furthermore, fee income might be disrupted due to weak loan activity, sluggish capital markets, and diminished exchange rate (FX) related fees resulting from slower exports.
The potential reduction in the policy interest rate could put further pressure on the Net Interest Margin (NIM). Prospects for another rate cut in 2025, once in April and again in the latter half of the year, pose an additional downside risk to NIM. Large banks such as BBL, KTB, SCB, and BAY, which have a higher proportion of floating-rate loans, are more susceptible to such pressure compared to smaller banks like TISCO and KKP, which focus on fixed-rate auto loans. The full-year impact of these rate cuts will be realized in 2026, posing a more significant profitability challenge in a low-interest-rate environment.
The manufacturing sector becomes more vulnerable. This sector, comprising 11% of total system loans, is the most affected by counter tariffs as it includes key export loans targeted by the U.S. KBANK, BBL, and SCB hold 41%, 27%, and 28% of loans related to manufacturing and commerce, respectively. While the real estate sector may face short-term issues due to recent earthquakes, credit risk remains relatively low at 5–9% of total loans for major banks.
Forecasts for bank profits for 2025-2027 have been revised downward by 1-2.9% to reflect reduced loan growth and fee income, along with a NIM reduction by 5-10 basis points. KKP and TISCO are somewhat shielded from NIM pressure, yet they still face risks from declining brokerage and asset management fees. In the worst tariff scenario, profits may face additional downside of 2-3% from further reduced loan growth and marketing-related fee income.
KS adds that its stance on the banking sector remains neutral, with TTB as the sole standout stock. Despite expected strong and sustainable dividend yields, the firm sees no significant catalysts for this sector due to anticipated slower loan growth, declining NIM, and ongoing asset quality risks from SME and housing loans. KS anticipates the banking group would report slight profit growth declines in 2025. Additionally, the securities company believes this sector lacks positive catalysts following the ex-dividend period in April-May, and investors may become more cautious about profit growth prospects heading into the latter half of 2025.
