Thai Banks Report Q2 2025 Profit Decline Amid Uncontrolled Economic Uncertainty

Thailand’s commercial banking sector has reported a combined profit of 66.2 billion Thai Baht (~US$1.85 billion) for the second quarter of 2025, marking a nearly 3% decline from the previous quarter. This downturn, driven by rising provisions for bad debts and looming concerns over global economic policies, signals a cautious outlook for the industry as it braces for potential challenges in the third quarter.

Profit Decline and Rising Provisions

The 11 major Thai banks, including Bangkok Bank, Kasikornbank, and SCB X Group, collectively posted a profit of 66.2 billion baht in Q2 2025, down from 68.3 billion baht in the prior quarter. Despite this quarterly drop, the first half of the year showed resilience, with a total profit of 134.5 billion baht (~US$3.76 billion), reflecting a year-on-year increase of nearly 4%. However, the sector’s health is under scrutiny as provisions for bad debts surged to 57.6 billion baht (~US$1.61 billion) in Q2, a 5.3% rise from the previous quarter, though down 8.7% compared to the same period last year.

This increase in provisions reflects growing concerns over asset quality amid a backdrop of domestic economic challenges and international uncertainties. For the first half of 2025, total provisions reached 112.3 billion baht (~US$3.14 billion), a decrease of nearly 9% year-on-year, indicating a cautious but still significant buffer against potential loan defaults.

Individual Bank Performances

SCB X Group, one of Thailand’s leading financial institutions, stood out with a robust performance, reporting a net profit of 12.79 billion baht (~US$357 million) for Q2 2025, a substantial 27.7% increase from the same period last year. For the first half of the year, SCB’s net profit climbed to 25.29 billion baht (~US$707 million), up 18.7% year-on-year. The bank attributed this growth to higher investment income, reduced provisions, and effective cost management, with operational expenses cut by 5.6% to 17.53 billion baht (~US$490 million). SCB’s cost-to-income ratio also improved, dropping to 40.2%, while its non-performing loan (NPL) ratio slightly decreased to 3.31% from 3.34% last year.

In contrast, Kasikornbank faced headwinds, reporting a net profit of 12.48 billion baht (~US$349 million) in Q2, a decline of 9.45% compared to the previous year. The drop was largely due to reduced net interest income following market-driven interest rate cuts aimed at supporting borrowers. The bank set aside provisions for expected credit losses totaling 10.05 billion baht (~US$281 million), a slight increase of 2.36%, with total provisions for the first half of 2025 amounting to 19.86 billion baht (~US$555 million). Kasikornbank’s NPL ratio remained steady at 3.18%, with a coverage ratio of 162.77%, signaling a strong buffer against potential losses.

TMBThanachart Bank (TTB) also navigated a challenging quarter, emphasizing cautious operations amid economic uncertainty. While specific profit figures for TTB were not detailed in the latest reports, the bank’s leadership underscored a focus on customer care and asset quality management as key priorities during this period of heightened risk.

Analyst Insights and Sector Outlook

Despite the mixed results among individual banks, analysts noted that the overall performance of the Thai banking sector in Q2 2025 exceeded expectations. Piriyaphon Kongwanich, Director of Fundamental Analysis at Bualuang Securities, highlighted that sector profits averaged a 7% increase, with SCB surpassing forecasts by 17%, Kiatnakin Phatra Bank (KKP) by 26%, and Bangkok Bank by 7%. This better-than-expected outcome was driven by investment income and reduced operating expenses, even as NPL ratios remained largely stable or saw slight increases.

However, caution remains the watchword for the remainder of 2025. Analysts foresee a potential 7% year-on-year decline in banking sector profits for the full year, with market predictions pointing to a 2% drop compared to 2024. Phisut Ngamwijitwong, Senior Director of Securities Analysis at Kasikorn Securities, echoed this sentiment, noting that while Q2 profits were buoyed by investment income, the third quarter could see declines due to shrinking net interest margins (NIM) and slowing loan growth. Banks are expected to tighten credit issuance further, with asset quality likely to weaken and credit costs projected to rise.

Adding to these concerns are external factors, particularly the anticipated impact of global economic policies. The potential for tax and interest rate cuts under a prospective US administration policy shift has raised questions about its ripple effects on Thailand’s export-driven economy and financial sector. Thai banks are preparing to assess the likelihood of one to two policy rate cuts in the second half of 2025, which could further pressure profitability.

Strategic Responses to Economic Challenges

In response to these uncertainties, Thai banks are adopting a range of strategies to safeguard stability and support their stakeholders. SCB X Group, for instance, working together with government and private sectors, including the Ministry of Finance, the Bank of Thailand, and the Thai Bankers Association, have partnered to introduce additional relief measures for retail and SME debtors under the “You Fight, We Help” campaign and has plans to expand Phase 2 of the initiative to provide further relief to vulnerable groups. The bank has also received approval to establish a branchless commercial bank, a move aimed at expanding digital financial services and securing long-term growth in an increasingly tech-driven market.

Kasikornbank, meanwhile, is focusing on sustainable value creation for depositors, investors, and clients. Its leadership emphasized a commitment to stable shareholder returns through the “3+1 Strategy,” which prioritizes operational efficiency amid a volatile economic landscape. This approach reflects a broader industry trend of balancing profitability with social responsibility, as banks seek to mitigate the impact of high household debt and a prolonged economic slowdown on their customer base.

TMBThanachart Bank’s emphasis on cautious business operations and customer care underscores a similar focus on resilience. As economic conditions remain unpredictable due to both domestic challenges—such as high household debt—and external pressures like global slowdowns, Thai banks are doubling down on risk management and asset quality monitoring to navigate the road ahead.

Broader Economic Context

The performance of Thailand’s banking sector in Q2 2025 must be viewed within the wider context of the country’s economic landscape. Thailand, a key player in Southeast Asia’s economy, has long grappled with structural issues such as household debt, which remains among the highest in the region. This burden, coupled with external risks like fluctuating global demand and policy shifts in major economies, poses significant challenges for financial institutions.

Moreover, the banking sector’s cautious outlook aligns with broader concerns about Thailand’s economic recovery trajectory. While the first half of 2025 showed year-on-year profit growth, the quarterly decline in Q2 signals potential vulnerabilities. Analysts suggest that sustained efforts to manage NPLs and provisions will be critical, especially as the sector anticipates tighter credit conditions and weaker loan growth in the coming months.

The interplay between domestic policies and international developments will also shape the sector’s future. For instance, potential US policy changes, including tax reforms and interest rate adjustments, could impact Thailand’s trade and investment flows, indirectly affecting banking profitability. Domestically, the Thai central bank’s monetary policy decisions will play a pivotal role in determining whether banks can maintain margins amid pressure to support borrowers through lower rates.

Looking Ahead

As Thailand’s banking sector moves into the second half of 2025, the focus will likely remain on balancing profitability with risk mitigation. While some banks, like SCB, have demonstrated resilience through strategic cost management and digital expansion, others face challenges in sustaining income amid declining interest margins and rising credit costs. The anticipated impact of global economic policies adds another layer of complexity, with potential rate cuts and trade disruptions on the horizon.

For now, the industry’s ability to adapt to these evolving dynamics will be key. With asset quality under pressure and economic uncertainty persisting, Thai banks are poised to navigate a delicate path, one that requires both caution and innovation to secure stability in an unpredictable landscape. Whether these efforts will suffice to weather the challenges of Q3 and beyond remains an open question, as stakeholders watch closely for signs of recovery or further strain.