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Thailand’s banks bounce back from 2011’s disasters

They are benefiting from the economy’s recovery, but some analysts are cautious about heavy exposure to retail lending.

Thai banks are growing strongly as the country recovers from devastating floods in 2011, with the sector as a whole posting a 14% year-on-year increase in second-quarter profits, according to Nomura analyst James Moss.

Moss, who had actually predicted even higher growth (17%), is negative on the retail segment, "where growth is slowing and NPL formation rising", and positive on the corporate and SME sector, where lending is accelerating for the first time since the 2011 floods. "Contractor backlogs, foreign investment applications and industrial land sales are all up sharply since 2010," he says. "Coupled with elevated business confidence, which has recovered after the detrimental commodity super-cycle, the implication is that investment is rising."

Banking is dominated by four houses: Bangkok Bank, Kasikornbank (KBank), Siam Commercial and Krung Thai. Beyond them other important institutions are Kiatnakin Bank, TMB Bank, Bank of Ayudhya, Thanachart and Tisco Financial.

Despite the growing profits, some analysts are reining in their enthusiasm. In August, Credit Suisse downgraded the Thai banking sector, along with Malaysia’s. "The good thing about Thai banks is that they have kept P&L credit costs relatively close to normalized levels, and are projected to report the best earnings growth in Asia in 2013," said the bank in an August report.

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