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Business Times
9 hours ago
- Business
- Business Times
Thailand's tourism slump and household debt weigh on its lenders
[BANGKOK] Thailand's banks are grappling with weak lending amid high household debt, slowing tourism and sluggish consumer spending that risk dampening their outlook for the rest of the year. The banks are facing lacklustre earnings tied to lower net interest margins – the difference between interest income and paid interest – and muted loan growth as the country endures economic uncertainties, according to a note from Citi Research. Thailand's export and tourism reliant economy has expanded at an average of under 2 per cent over the past decade, trailing other major South-east Asian economies. Gross domestic product will likely grow 1.3 per cent to 2.3 per cent in 2025, constrained by high household debt and slowing tourist arrivals, while the economy is also at risk of a 36 per cent tariff from the US, its largest export market. Thai banks are expected 'to perform worse than their peers elsewhere in major South-east Asian markets through year-end,' said Bloomberg Intelligence analyst Sarah Jane Mahmud. Weak domestic lending is compounded by a slowdown in global trade and 'high levels of bad debt to be exacerbated as small businesses struggle with fewer than expected tourist arrivals and competition from an influx of cheap goods from China in the new trade war,' she said. TMBThanachart Bank expects the Thai economy to continue slowing in the third quarter on lower consumption and overall investments, it said in its earnings statement on Jul 18. It posted 5 billion baht (S$198.4 million) in second-quarter net income, a 7.2 per cent year-on-year drop. Kasikornbank posted a 3.2 per cent fall year on year in its second-quarter net profit due to a decline in net interest income in line with market conditions, it said. The lender said it remains focused on expansion of quality loans. A NEWSLETTER FOR YOU Friday, 8.30 am Asean Business Business insights centering on South-east Asia's fast-growing economies. Sign Up Sign Up SCB X expects full-year loan growth to fall below the lower end of its 1 to 3 per cent target, though it reported a 27.7 per cent on-year jump in second-quarter net profit supported by higher investment gains. Bangkok Bank posted a 0.3 per cent on-year rise in its second quarter net profit. Subdued inflationary pressure indicates domestic demand 'has not yet fully recovered,' it said in its recent earnings statement. Kasikornbank and SCB X are forecast to see year-on-year declines in net profit for the third quarter from declining net interest margins due to policy rate cuts, according to Krungsri Securities analyst Chayaporn Tocharoen. 'Loans of Thai commercial banks aren't expected to record growth in the third quarter mainly because of a weak export outlook,' Kasikorn Securities analyst Korakot Sawetkruttamat said. Higher non-performing loans are anticipated in the second half because of lower-than-expected registrations for the government's debt relief programme, he said. Meanwhile, exporters may struggle to repay loans if they face high US tariffs, Korakot said. The Thai government in late 2024 put in place debt-relief measures that included a three-year suspension in interest and reduced principal payments. 'Policy measures, however, require time to crystallise and effect a structural shift,' said Deepali Seth Chhabria, a primary credit analyst at S&P Global Ratings. A lower negotiated tariff would give Thai banks some relief, Bloomberg Intelligence analyst Sarah Jane said. A rise in wealth management activity in Thailand could also 'help boost fee income and support revenue as net interest income wanes,' she said. BLOOMBERG
Bangkok Post
11 hours ago
- Business
- Bangkok Post
Thailand's tourism slump and household debt weigh on its lenders
Thailand's banks are grappling with weak lending amid high household debt, slowing tourism and sluggish consumer spending that risk dampening their outlook for the rest of the year. The banks are facing lackluster earnings tied to lower net interest margins — the difference between interest income and paid interest — and muted loan growth as the country endures economic uncertainties, according to a note from Citi Research. Thailand's export and tourism reliant economy has expanded at an average of under 2% over the past decade, trailing other major Southeast Asian economies. Gross domestic product will likely grow 1.3% to 2.3% in 2025, constrained by high household debt and slowing tourist arrivals, while the economy is also at risk of a 36% tariff from the US, its largest export market. Thai banks are expected 'to perform worse than their peers elsewhere in major Southeast Asian markets through year-end,' said Bloomberg Intelligence analyst Sarah Jane Mahmud. Weak domestic lending is compounded by a slowdown in global trade and 'high levels of bad debt to be exacerbated as small businesses struggle with fewer than expected tourist arrivals and competition from an influx of cheap goods from China in the new trade war,' she said. TMBThanachart Bank expects the Thai economy to continue slowing in the third quarter on lower consumption and overall investments, it said in its earnings statement on July 18. It posted 5 billion baht in second-quarter net income, a 7.2% year-on-year drop. Kasikornbank posted a 3.2% fall year-on-year in its second-quarter net profit due to a decline in net interest income in line with market conditions, it said. The lender said it remains focused on expansion of quality loans. SCB X expects full-year loan growth to fall below the lower end of its 1%-3% target, though it reported a 27.7% on-year jump in second-quarter net profit supported by higher investment gains. Bangkok Bank posted a 0.3% on-year rise in its second quarter net profit. Subdued inflationary pressure indicates domestic demand 'has not yet fully recovered,' it said in its recent earnings statement. Kasikornbank and SCB X are forecast to see year-on-year declines in net profit for the third quarter from declining net interest margins due to policy rate cuts, according to Krungsri Securities analyst Chayaporn Tocharoen. 'Loans of Thai commercial banks aren't expected to record growth in the third quarter mainly because of a weak export outlook,' Kasikorn Securities analyst Korakot Sawetkruttamat said. Higher non-performing loans are anticipated in the second half because of lower-than-expected registrations for the government's debt relief program, he said. Meanwhile, exporters may struggle to repay loans if they face high US tariffs, Mr Korakot said. The Thai government in late 2024 put in place debt-relief measures that included a three-year suspension in interest and reduced principal payments. 'Policy measures, however, require time to crystallise and effect a structural shift,' said Deepali Seth Chhabria, a primary credit analyst at S&P Global Ratings. A lower negotiated tariff would give Thai banks some relief, Bloomberg Intelligence analyst Sarah Jane said. A rise in wealth management activity in Thailand could also 'help boost fee income and support revenue as net interest income wanes,' she said.
Forbes
20-06-2025
- Business
- Forbes
Groups Backed By Thai Billionaires Dhanin, Sarath, Win Virtual Bank Licenses
Mobile banking is one of the services to be provided by virtual banks. Three groups backed by energy-to-telecommunications tycoon Sarath Ratanavadi, billionaire Dhanin Chearavanont's Charoen Pokphand Group and an international consortium led by Siam Commercial Bank's SCB X won permits to establish virtual banks in Thailand, the central bank announced on Thursday. The Bank of Thailand hopes the entry of new players would boost innovation in the banking industry and stimulate competition, while maintaining the country's financial stability. The virtual banks are expected to start their commercial operations within one year from the issuance of the licences. Establishing a virtual bank is a major diversification move for Charoen Pokphand, Thailand's largest conglomerate with interests in agribusiness, food, retail, e-commerce, fintech, media, real estate and telecommunications. CP Group is the main source of wealth for Dhanin Chearavanont and his family, whose net worth of $29 billion makes them the country's second wealthiest. For Sarath, a virtual bank is a natural extension of his Gulf Development's ventures in digital infrastructure such as data centers and crypto currency exchange. The project will be implemented by his Advanced Info Service, the nation's second biggest mobile carrier. Sarath has a real-time net worth of $11.1 billion. SCB X, meanwhile, has roped in digital banks such as China's WeBank and South Korea's Kakao Bank, a unit of billionaire Kim Beom-su's Kakao messaging app, to help it build a digital bank in Thailand. Although virtual bank operations can provide long-term opportunities for those getting the licenses, any immediate impact will likely be limited since they will need to book substantial investment and operating losses in the initial stage. 'We are of neutral view with this development because any material benefit will not be seen within the next five years,' Piriyapon Kongvanich, investment strategist at Bangkok-based Bualuang Securities, said. 'As earnings bases of those involved are massive, it will be difficult for future profits from the virtual bank businesses to push an uptick in their bottom lines.'
Business Times
19-06-2025
- Business
- Business Times
Top Thai billionaires-backed groups win digital bank permits
[BANGKOK] Three groups led by Charoen Pokmhand Group, Gulf Development and SCB X have clinched Thailand's new virtual bank licences to boost competition in the nation's banking industry, according to the central bank. ACM Holding, which is part of CP Group, and Advanced Info Service, a Gulf Development's mobile phone affiliate, secured the permits, Bank of Thailand said on Thursday (Jun 19). SCB X, which formed a consortium that includes China's WeBank and South Korea's KakaoBank, also obtained the virtual bank licence. 'We have high hopes that the new licences will increase competition in the banking industry with new innovation and technology,' deputy governor Roong Mallikamas told a press briefing. The announcement came amid a fresh political turmoil in the country that puts the current government on the brink of collapse. The nation is opening its banking industry to more competition that will allow greater access to loans for under-served consumers, following similar moves across Asia. Still, the new virtual banking operators will confront a landscape where traditional lenders are saddled with rising bad loans and weakening credit demand on the back of a soft economy. The timing of these permits is 'tricky and throws up a number of challenges,' said Sarah Jane Mahmud, a senior bank analyst at Bloomberg Intelligence. 'Singapore digital banks have yet to break even, three years after going live,' she said. 'With hefty investment in digital platforms and marketing, Thai digital banks could face a longer wait to generate profit.' Singapore handed out digital banking permits in 2020, followed by the Philippines and Malaysia. A NEWSLETTER FOR YOU Friday, 8.30 am Asean Business Business insights centering on South-east Asia's fast-growing economies. Sign Up Sign Up Low-income individuals and small business will also have a greater access to new credit by the new operators of virtual banks, said Roong. The Chearavanont family, which controls CP Group, is one of Asia's richest clans, according to the Bloomberg billionaires Index report. It has businesses spanning from foods and retail to telecommunication and properties. It forayed into digital payment and financial services through fintech unit Ascend Money, with more than 50 million customers in Thailand and six other South-east Asian countries. Gulf Development, controlled by billionaire Sarath Ratanavadi, was created earlier this year by combining his empire – ranging from power to seaports, tollways and telecommunication – under one roof with the goal to accelerate his expansion in digital infrastructure such as data centres. Sarath is Thailand's second-richest person with a net worth of USUS$11 billion. Joining Sarath's group in the bid are Krung Thai Bank and PTT Oil and Retail Business, according to the central bank's statement. BLOOMBERG
Korea Herald
19-06-2025
- Business
- Korea Herald
Kakao Bank secures 'virtual bank' license in Thailand
South Korea's internet-only lender Kakao Bank said Thursday it has received approval from the Thai government to operate a "virtual bank," marking the first reentry of a Korean bank into the Thai market in 25 years. The Thai Ministry of Finance recently selected a consortium formed by Kakao Bank and Thailand's leading financial group SCBX as one of three operators of the country's upcoming virtual banking system. "This license is a crucial step in exploring new markets and a valuable opportunity to showcase the excellence of Korea's digital finance technology," Kakao Bank Chief Executive Officer (CEO) Yoon Ho-young said. Through the virtual bank project, Kakao Bank aims to serve as a bridgehead for Korean banks and companies looking to enter the Thai market, he said. The Kakao Bank consortium received high marks for its expertise in building digital banking infrastructure, advanced technological capabilities, and localization strategies. Thailand's virtual banking initiative is designed to offer financial services entirely through digital platforms without physical branches -- similar to South Korea's internet-only banks. Full-scale operations are expected to begin in the second half of 2026, following a one-year preparation period.
