Equity Analysis /

Thailand: Bank - Scope for upside from interest rate rise

  • MPC voted 4-3 to keep the benchmark rate at the record low of 0.5%

  • Scope for Bank sector profit upside, due to a higher Repo Rate …

  • …but downside risk from possible higher MLR and deposit rate

Poramet Tongbua
Poramet Tongbua

Equity Research Analyst

Bualuang Securities
9 June 2022

We forecast a 2022 Bank coverage aggregate profit of Bt198.8bn, up 11% YoY. If The BOT’s One-day Repurchase Rate were to increase, there would be scope for upside to our 2022 and 2023 aggregate Bank coverage earnings projections. Our sector call is OVERWEIGHT with BBL and KKP as our top picks.

What’s new?

Yesterday, the Bank of Thailand’s Monetary Policy Committee (MPC) voted 4-3 to keep the benchmark rate at the record low of 0.5% (it has been 0.5% since May 2020). We had expected the BOT to keep its policy interest rate steady. What we hadn’t expected would be that the vote would be so close—all the other recent MPC votes over the Repo Rate have been near-unanimous. The implication is that if core inflation were to rise significantly (it was only 2.28% in May), the BOT would probably vote in favor of raising its policy interest rate (we would assume 25bps increments) at its next MPC in August.