We believe Thailand’s GDP growth forecast of 3.6% this year has downside risk given 1Q19 only managed a disappointing 2.8%. Negative factors include shrinking exports and low public-investment activity. Falling oil prices may result in less working-capital loans from petrochemical-related businesses, which could impact any increase in banks’ lending this year.
More worried about credit cost
Although banks have not seen higher nonperforming-loan risk, we are concerned about an increase in special-mention loans during 1Q19. As this could result in a rise in credit cost, we update our assumptions for the big-four banks in 2019.
Low ROE from mismanaged capital
The big-four banks are unlikely to change their dividend payout ratios as they are too important to the country’s economy. Although Thai banks have low loan-growth outlook, they need to maintain high reserves to satisfy the central bank. Capital mismanagement is negative to banks’ ROE and could affect investor interest.