Thailand's bank fundamentals remain strong

Thai bank fundamentals remain sound, although asset quality has begun to show signs of gradual weakness. The weakened growth outlook for Thailand will weigh on bank asset quality in 2015 (see On the Ground, 7 May 2015, 'Thailand - Faltering exports dim growth outlook'). Several banks have reported an uptick in provisioning expenses, special-mention and non-performing loan (NPL) ratios.

However, they have built solid loss-absorption buffers in the form of loan loss reserves and equity capital in recent years. Similarly, although analysts expect profitability to soften somewhat given the lower rates and growth outlook, Thai banks' profitability remains strong in the regional context, supported by broad domestic market shares in key sectors and healthy fee income at the 'big four' Thai banks, according to Standard Chartered.