Kasikornbank Plc has abandoned a major profit goal amid concerns that Thailand’s already fragile economy may worsen further, potentially dampening loan demand and increasing default rates.
Thailand’s second-largest bank is unlikely to meet its previously pledged target of achieving at least a 10% return on equity by the end of 2026, according to CEO Kattiya Indaravijaya.
In an interview in Bangkok on Monday, she explained that the bank is adopting a “more cautious” approach to its business operations due to the challenging local economic environment, which is impacted by US tariffs, border disputes, and political instability.
“The Thai economy is much weaker than we previously anticipated, with a lot of negative news,” Kattiya said. “We are now taking a defensive stance, focusing on high-quality lending and controlling bad debts.”
This outlook reflects broader economic concerns, as Thailand is grappling with slow growth and political uncertainty. Rising US tariffs have hurt exports, while tourism—an essential source of revenue—is not performing as strongly as before. The recent political vacuum, following the court-ordered dismissal of Paetongtarn Shinawatra from the premiership last week, has raised worries that key economic policies could face delays.
Thailand’s GDP growth slowed to 2.8% in the second quarter, down from over 3% in the previous quarter. The bank’s return on equity (RoE) is already among the lowest in Thailand and Southeast Asia, where averages are around 10% and 14%, respectively, according to Bloomberg data.
KBank’s RoE dropped to approximately 8.9% in Q2 from 9.7% a year earlier, with net profit declining by 3.2%. The bank cited lower net interest income, caused by waning loan demand and declining interest rates, as the primary reason for this weakening performance. Despite this, KBANK has risen about 10% this year, outperforming the 9.3% decline of the SET Index.
“While the bank is enhancing its prudent lending practices to manage credit risks, pressure on its bond issuance is likely to persist given current valuations and the tough economic climate,” noted Rena Kwok, a senior credit analyst at Bloomberg Intelligence.
She added that KBANK’s higher exposure to small businesses—over a quarter of its loans—and the fact that 8.4% of its loans are classified as stage 2 (where borrowers’ credit risk has increased significantly but the loans have not defaulted) pose additional risks compared to peers.
To counteract slowing loan growth, Kasikornbank plans to focus more on increasing fee income through bancassurance and wealth management services, according to Kattiya. Although lower interest rates will squeeze net interest margins, reduced borrowing costs are expected to help borrowers repay loans more easily.
Following the Bank of Thailand’s recent rate cut to 1.50%, the lowest in over two years, Kasikornbank and other lenders have lowered their lending rates. Economists now see increased chances of further rate reductions as the central bank aims to shield the economy from ongoing political and financial uncertainties.
Additionally, KBank is banking on its online banking platform to help sustain its growth, aiming to compete with three new virtual banks slated to launch in 2026. The bank already offers various financial services targeting underserved individual customers, which is expected to give it an edge against the new entrants, Kattiya said.