Equity Analysis /

Thailand: Bank - Improving asset quality enhances 2022 outlook

  • FIDF fee to resume pre-COVID level when economic conditions allow

  • Lighter LLPs and improving asset quality

  • 2022 aggregate Bank coverage profit forecast to rise 11% YoY

Poramet Tongbua
Poramet Tongbua

Equity Research Analyst

Bualuang Securities
6 June 2022

We joined a virtual conference with a BOT financial regulator last week. The asset quality of banks will improve through this year. In 2024 the annual FIDF fee will probably resume its normal level of 0.46% of deposits. We forecast a 2022 Bank coverage aggregate (eight banks) profit of Bt198.8bn, up 11% YoY. Our sector call is OVERWEIGHT with BBL and KKP as our top picks.

FIDF fee to resume pre-COVID level when economic conditions allow

We expect the Bank of Thailand to reset the annual FIDF fee to 0.46% of deposits in 2024 (it has been 0.23% since the advent of COVID-19). “What may happen with the FIDF is still to be determined because it's going to expire at the end of this year,” said the BOT financial regulator. “The decision is about [whether] to …extend or just to …go back to normal [a 0.46% rate] will …depend on economic conditions.” Thailand’s economy currently faces headwinds, including faster inflation—keeping the FIDF fee low in the interim will ease bank costs. In our models, we conservatively assume that the FIDF fee will resume 0.46% in 2023. Assuming that it is increased to only 0.35% in 2023, there would be scope for upside to our aggregate 2023 earnings forecast of 6.7%.