Thai Banks Maintain Profitability through Strategic Pivot as Economic Headwinds Persist

 

Resilience driven by surging non-interest income and rigorous cost control, mitigating pressure from rate cuts; elevated provisioning signals deep caution for 2026

 

Thailand's commercial banking sector has executed a significant strategic pivot in the first nine months of 2025, shifting away from traditional lending revenue to maintain profitability amid persistent economic headwinds.

 

The tactical maneuver has enabled banks to stabilize earnings despite mounting pressure on their core business.

 

For the third quarter of 2025, major banks demonstrated resilience with varied performance.

 

SCBX led with net profit of 12.1 billion baht, up 10.2% year-on-year, while Kasikornbank posted 13.0 billion baht, rising 4% year-on-year.

 

TMBThanachart reported 5.3 billion baht in Q3 profit, relatively stable compared to the same quarter last year.

 

Bangkok Bank achieved strong growth, with quarterly profit contributing to its nine-month total of 38.2 billion baht, up 9.9% year-on-year.

 

For the nine-month period, the sector maintained stability despite challenges.

 

SCBX reported consolidated net profit of 37.3 billion baht, a 15.8% year-on-year increase, while Kasikornbank achieved 39.3 billion baht, up 1.16%.

 

Krungsri posted 24.6 billion baht, rising 5.1%, and TMBThanachart recorded 15.4 billion baht, declining 4.0%.

 

However, the underlying performance reveals a sector under strain.

 

Decelerating export growth, sluggish tourism recovery, elevated household debt, and policy rate reductions—enacted to provide customer debt relief—have combined to compress Net Interest Income (NII, the difference between lending and deposit rates) and Net Interest Margins (NIM) across the industry.

 

 

The Revenue Pivot: Wealth Management Takes Center Stage

Non-interest income emerged as the principal engine sustaining profit growth, compensating for pressure on traditional lending returns.

 

Wealth management led the charge. In Q3 2025, SCBX's fee and other income totaled 10.9 billion baht, a 9.6% year-on-year increase, directly attributed to strong inflows into high-value funds.

 

For the nine-month period, the bank's investment and trading income reached 3.3 billion baht, a turnaround from last year's loss.

 

Kasikornbank saw similar gains, with non-interest income for nine months reaching 42.7 billion baht, up 13.80%, driven by fund management services tailored to evolving customer demand.

 

TMBThanachart's Q3 non-interest income rose 7.4% quarter-on-quarter, driven mainly by higher fees from bancassurance and mutual fund businesses.

 

Bangkok Bank also benefited from gains on financial instruments measured at fair value and investment gains, though net fees and service income declined slightly.

 

Strategic investment activities provided additional support.

 

Krungsri benefited from gains on financial instruments and a one-time windfall linked to the remeasurement of its increased equity stake in Tidlor Holdings Plc (from 30.18% to 46.51%), contributing to its 5.1% year-on-year net profit increase to 24.6 billion baht for nine months.

 

The bank's non-interest income surged 15.8%, or 5.3 billion baht, primarily due to the TIDLOR transaction and gains on financial instruments.

 

CIMB Thai also saw a 34% increase in other income to 3.4 billion baht, driven by higher net investment gains, though this was offset by declines in core revenue.

 

 

The bank's pre-provision operating profit increased 24.6% year-on-year to 5.2 billion baht, though net profit declined 3.2% to 1.8 billion baht for nine months due to elevated provisioning.

 

"This strategic move is expected to foster financial inclusion and aligns with Krungsri's strategic direction to capture growth opportunities within the underserved segment," said Kenichi Yamato, president and CEO of Krungsri.

 

 

 

Cost Discipline Protects the Bottom Line

Banks paired their revenue diversification with aggressive cost management.

 

Most major institutions held Cost-to-Income ratios between 40% and 44%, with SCBX achieving 40.2% in Q3, Kasikornbank at 42.07%, TMBThanachart at 44%, and Bangkok Bank improving to 44.7%.

 

CIMB Thai achieved the most dramatic improvement, slashing its Cost-to-Income ratio to 50.2% in nine months from 61.0% in the prior period through rigorous expense management, reducing operating expenses by 19.4% or 1.3 billion baht year-on-year.

 

Paul Wong Chee Kin, president and CEO of CIMB Thai, said the improved ratio "underscores the effectiveness of our ongoing efforts to enhance operational efficiency."

 

SCBX's operating expenses decreased slightly by 0.2% year-on-year to 17.6 billion baht in Q3 due to effective cost control measures. Kasikornbank reduced other operating expenses by 134 million baht or 0.22% for nine months through continuous efficiency improvements.

 

Beyond immediate cuts, institutions like SCBX and TTB are deploying digital transformation and AI to fundamentally redesign operations, targeting long-term, sustainable reductions in service delivery costs.

 

 

 

Asset Quality Contained, But Banks Build War Chests

Credit quality remains largely controlled despite the difficult macroeconomic environment, with Non-Performing Loan (NPL) ratios holding between 2.81% (TTB) and 3.49% (Krungsri).

 

Yet prevailing economic uncertainty has prompted exceptionally prudent provisioning.

 

While some banks reduced the quantum of Expected Credit Loss (ECL) provisions compared to last year, overall provisioning levels remain high.

 

TTB established an explicit "Management Overlay," while SCBX added a 1.4 billion baht "additional cushion" against future macroeconomic risks.

 

The cautious approach has produced some of the region's strongest NPL coverage ratios.

 

Bangkok Bank (BBL) leads with 294.2% coverage, followed by SCBX at 161.7% and CIMB Thai at 158.1%. These robust buffers prepare banks for potential asset quality deterioration should economic recovery stall.

 

 

 

Cautious Outlook Shapes 2026 Strategy

Banking CEOs project low economic growth into 2026, citing continued global volatility, trade policy impacts, and subdued domestic consumer confidence.

 

Their strategic response centers on three imperatives:

 

Debt Management: Banks are running large-scale debt relief programs to proactively manage portfolio quality.

 

"We will maintain the prudent business direction... setting goals to generate quality growth and enhance stakeholders' returns," said Piti Tantakasem, CEO of TMBThanachart, emphasizing the bank's focus on "responsible lending and sustainable solutions to address household debt issues."

 

Digital Ecosystems: Technology investment continues, including inorganic growth plays like Krungsri's strategic investment in TIDLOR to capture underserved retail and SME segments.

Arthid Nanthawithaya, CEO of SCBX, noted the group is "progressing towards becoming an AI-first organization by integrating AI into all aspects of operations."

 

 

Regional Diversification: BBL continues leveraging its extensive regional network to support large corporate customers seeking international growth.

"Our strong regional and international position places us in a unique position to support the Thai economy through enabling local corporations to diversify their operations by seeking growth opportunities across ASEAN and beyond," said Chartsiri Sophonpanich, president of Bangkok Bank.

 

Kattiya Indaravijaya, Chief Executive Officer of Kasikornbank, encapsulated the sector's balancing act: "Our strategy focuses on balanced and efficient growth while keeping an eye on potential economic headwinds, both locally and globally, as well as the increasing geopolitical uncertainty."

 

The Thai banking sector has demonstrated structural soundness in 9M 2025, maintaining capital adequacy ratios exceeding 18% for most players.

 

By diversifying revenue streams and controlling costs, banks have weathered the current storm. However, elevated provisioning levels signal that management teams are preparing for turbulence ahead, not declaring victory.