The net interest income (NII) of listed banks is expected to decline significantly in the third quarter of this year, weighed down by the Bank of Thailand’s policy rate cuts totalling one percentage point over the past 12 months.
KGI Securities forecasts the combined NII of the seven SET-listed banks under its coverage will fall by 3% quarter-on-quarter (q-o-q) and 10% year-on-year (y-o-y) in the third quarter of 2025. The decline is primarily attributed to a narrower net interest margin (NIM), in line with the central bank’s policy rate reductions.
For the third quarter, KGI expects the combined NIM of the seven banks to decrease by 10 basis points (bps) q-o-q and 40 bps y-o-y.
The brokerage also anticipates the banking sector’s combined earnings will drop by 9% q-o-q and 6% y-o-y.
Given the central bank’s accommodative monetary policy, the Monetary Policy Committee (MPC) has lowered the policy rate four times since October 2024, totalling 100 bps in reductions.
In 2025, the MPC made three consecutive cuts — 25 bps each in February, April and August. The MPC has since kept the rate unchanged, maintaining it at 1.5%.
KGI projects the banking sector’s combined net profit for the third quarter of 2025 will decline by 9% q-o-q and 6% y-o-y.
Pi Securities expects both NIM and NII for the banking sector to slow on a quarterly and yearly basis, citing the lagged effect of policy rate transmission.
The firm added Thailand’s fragile economy will continue to weigh on loan growth and banking profitability.
Pi Securities forecasts the sector’s combined net profit in third quarter at 59.6 billion baht, representing a modest increase of 0.5% q-o-q and 3.5% y-o-y.
In a related development, Fitch Ratings Thailand stated yesterday declining interest rates would help support borrowers’ repayment capacity amid the economic slowdown.
However, the ratings agency noted the sluggish economy could still weigh on asset quality and lead to increased impaired loans across the banking sector.
Fitch estimates the Thai banking industry’s impaired loan ratio will edge up from 3.4% in 2024 to 3.7% in 2025, then remain steady next year, mainly driven by small and medium-sized enterprises. Impaired loans in this segment rose from 7.2% last year to 7.9% in the first half of 2025.
Fitch also forecasts Thai GDP growth of 2.2% in 2025 and 1.9% in 2026, down from 2.5% in 2024.
However, sustained low unemployment and lower interest rates are expected to help support borrowers’ repayment ability.