Comprehensive Analysis of Thailand’s Banking Sector – 2025 Outlook

Date: January 7, 2025

Broker: Maybank Securities (Thailand) Public Company Limited

Overview of Thailand’s Banking Sector

The banking sector in Thailand has consistently outperformed the market, achieving a 5.5% lead over the SET index in 2024. However, the sector is expected to face headwinds in 2025 due to weaker revenue and earnings growth. Analysts predict a 6% earnings growth for the sector, down from 7% in 2024. Factors such as weak loan growth, lower net interest margins (NIMs), and increasing non-performing loans (NPLs) are expected to influence performance. Despite these challenges, attractive valuations and decent dividend yields offer a cushion for downside risks.

Kiatnakin Phatra Bank (KKP)

Recommendation: Buy

KKP stands out as the top pick among mid-to-small banks due to its projected FY25 earnings per share (EPS) growth of 24% year-on-year. This growth is driven by:

• Lower losses from asset sales.
• Reduced cost of funds.
• Fee income recovery.
• A solid capital management plan, including share buybacks.

The bank’s lending is contracting, but its FY25 valuations remain attractive. KKP offers a dividend yield of 8.2%, making it a compelling choice for investors seeking both growth and income. Its strong fundamentals and active capital management strategy position it as a leader in the sector.

Krung Thai Bank (KTB)

Recommendation: Buy

KTB is the preferred choice among large banks due to its low-risk loan portfolio and strong earnings visibility. The bank is projected to grow its EPS by 6.9% in FY25, supported by its robust asset quality and capital management. KTB offers an attractive valuation with a P/E ratio of 6.9x for FY25 and a dividend yield of 5.8%. Its focus on maintaining a low NPL ratio and high NPL coverage makes it a resilient player in Thailand’s banking sector.

Kasikornbank (KBANK)

Recommendation: Buy

KBANK is expected to achieve a 12% upside in its stock price, with a new target price of THB177. The bank’s FY25 earnings are projected to grow by 7.4%, driven by higher fee income growth from wealth management and foreign exchange transactions. While its NIM is expected to decline slightly to 3.65% in FY25, its credit cost is forecasted to improve to 1.70%. KBANK offers a dividend yield of 5.8%, making it an attractive investment for income-focused investors.

Bangkok Bank (BBL)

Recommendation: Buy

BBL’s target price has been revised down to THB175 from THB190 due to lower loan and fee income growth projections. Despite these adjustments, the bank remains a strong performer with a projected P/E ratio of 6.5x and a dividend yield of 5.2% for FY25. BBL has the highest NPL coverage ratio in the sector, which underscores its commitment to maintaining asset quality. However, its low dividend payout ratio may limit its valuation upside compared to peers.

TMBThanachart Bank (TTB)

Recommendation: Buy

TTB’s target price has been reduced to THB2.10 from THB2.20, reflecting lower NIM expectations. Despite this, TTB is poised for an ROE uptrend, driven by a shift in its loan mix, rising dividends, and effective cost control. The bank’s FY25 earnings growth is projected at 7.8%, with a dividend yield of 8.3%. TTB’s robust tax benefits and earnings visibility make it a solid choice for investors.

SCB X (SCB)

Recommendation: Hold

SCB’s premium valuation limits its upside potential, despite offering the highest dividend yield in the sector at 9.1% for FY25. Its earnings growth is expected to be modest at 4%, constrained by weak revenue growth and high credit costs. SCB’s P/E ratio of 8.8x reflects its premium status in the market.

TISCO Financial (TISCO)

Recommendation: Hold

TISCO boasts the highest ROE in the sector at 16.5% and a stable dividend yield of 8%. However, its earnings growth is expected to slow to 2% in FY25 due to higher NPL formation and credit costs. While TISCO remains a strong player, its limited room for re-rating makes it a less compelling investment compared to peers.

Thai Credit Bank (CREDIT)

Recommendation: Buy

CREDIT is a standout performer with a massive 57% upside potential. The bank’s target price is set at THB29, supported by a P/E ratio of 6.5x and an ROE of 14.6% for FY25. CREDIT’s strategic focus on niche markets and robust asset quality make it a high-growth opportunity for investors.

Sector-Wide Insights

The Thai banking sector is expected to face challenges in 2025, including weak loan growth, declining NIMs, and rising NPL ratios. However, robust dividend yields and attractive valuations offer a buffer against these headwinds. The sector’s P/E ratio is forecasted at 7.8x, while the P/B ratio stands at 0.75x for FY25, making it an undervalued segment for investors.

Conclusion

Thailand’s banking sector offers a mix of challenges and opportunities for 2025. While weak loan growth and declining NIMs are concerns, banks like KKP, KTB, and CREDIT stand out for their growth potential and attractive valuations. Investors seeking stable dividends and growth should consider these top picks, while holding positions in SCB and TISCO could provide steady income with limited upside.