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Listed banks’ net interest income (NII) is projected to decrease substantially in the third quarter of 2025, mainly due to the Bank of Thailand’s cumulative policy rate cuts totaling one percentage point over the past year.
KGI Securities estimates that the combined NII of the seven SET-listed banks it covers will decline by 3% quarter-over-quarter (q-o-q) and 10% year-over-year (y-o-y) for the third quarter. This drop is primarily driven by a narrowing of the net interest margin (NIM), reflecting the central bank’s interest rate reductions.
For the same period, KGI expects the banks’ combined NIM to decrease by 10 basis points (bps) q-o-q and 40 bps y-o-y.
The brokerage further predicts that the banking sector’s total earnings will fall by 9% q-o-q and 6% y-o-y.
Since October 2024, the Monetary Policy Committee (MPC) has lowered the policy rate four times, totaling a 100 bps reduction, adopting an accommodative monetary stance. In 2025, the MPC made three consecutive cuts of 25 bps each in February, April, and August. Since then, the rate has been steady at 1.5%.
KGI forecasts that the banking sector’s combined net profit for Q3 2025 will be down by 9% q-o-q and 6% y-o-y.
Pi Securities also anticipates a slowdown in both NIM and NII for the banking sector on a quarterly and annual basis, citing the delayed effects of policy rate transmission. The firm notes that Thailand’s fragile economy is likely to continue hampering loan growth and banking profitability.
Pi Securities expects the sector’s combined net profit in the third quarter to be around 59.6 billion baht, representing a modest increase of 0.5% q-o-q and 3.5% y-o-y.
In related news, Fitch Ratings Thailand commented that declining interest rates could enhance borrowers’ repayment capacity amid the economic slowdown. However, the agency warned that the sluggish economy might also negatively impact asset quality, leading to a rise in impaired loans across the sector.
Fitch estimates that the Thai banking industry’s impaired loan ratio could increase slightly from 3.4% in 2024 to 3.7% in 2025, before stabilizing. This uptick is mainly driven by small and medium-sized enterprises (SMEs), whose impaired loan ratio rose from 7.2% last year to 7.9% in the first half of 2025.
The agency also forecasts Thailand’s GDP growth to slow from 2.5% in 2024 to 2.2% in 2025 and further to 1.9% in 2026.
Nonetheless, sustained low unemployment rates and lower interest levels are expected to support borrowers’ repayment abilities.