Thai Banks' Results Show Buffers Retained Against Ongoing Risks
Thai banks' steady financial performance in 1H21 does not reflect ongoing risks, especially to asset quality, says Fitch Ratings.
The recent escalation of the Covid-19 pandemic in Thailand will significantly affect business activity, while the Bank of Thailand's regulatory relief measures will reduce asset-quality pressures on bank balance sheets until 2022. However, Fitch believes that the banks retain reasonable buffers against downside, which support Viability Ratings at current levels.
Operating profit/total assets improved slightly in 1H21 to 1.2% (2020: 0.9%) for listed Thai banks, however we expect pressure to return in 2H21. Provisioning has remained high, with loan-impairment charges as a percentage of pre-impairment operating profit at 47% in 1H21 (2020: 53%), leading to loan-loss allowance coverage at 152% of impaired loans. The banking sector's common equity Tier 1 was 16.3% at May 2021, and Fitch expects these levels can be maintained.
The report, "Thai Banks Dashboard: 1H21 Results", can be accessed on www.fitchratings.com or by clicking the link above.
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