Equity Analysis /

Thailand: Bank - Scope for upside from interest rate rise

  • A Repo Rate increase of 25bps is almost certain

  • Scope for Bank sector profit upside from a higher Repo Rate …

  • …and if MLR were to rise faster than the mean deposit rate

Poramet Tongbua
Poramet Tongbua

Equity Research Analyst

Bualuang Securities
9 August 2022

We forecast a 2022 Bank coverage aggregate profit of Bt204.3bn, up 14% YoY. But if the BOT’s One-day Repo Rate were to rise more than we assume and/or rises to MLR were to outpace increases to the mean deposit rate, there would be scope for upside to our 2022 and 2023 aggregate Bank coverage earnings projections. Our sector call is OVERWEIGHT. BBL and KBANK are our top picks.

A Repo Rate increase of 25bps is almost certain

Tomorrow, we expect the BOT’s Monetary Policy Committee (MPC) to raise the One-Day Repurchase Rate by 25bps to 0.75% (it has been 0.5% since May 2020); the consensus expectation is also a 25bps rate increase. The chief reason is to prevent prevailing high headline inflation feeding into core inflation (core inflation accelerated from 2.28% YoY in June to 2.99% YoY in July, according to the Ministry of Commerce—now clearly above the BOT’s 2% target). Note that at the June 8 MPC, the vote was split 4-3 in favor of keeping the policy interest rate at 0.5% (all the other recent MPC votes over the Repo Rate have been near-unanimous).