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.