Periodic/Sector reports
Banking: 2Q26: Results In Line; Fee And Service Income Boost Bottom Line
OVERWEIGHT (Maintained)
Analyst
Analyst
Panjarat Thaweesriprasert
Highlights
- Banks reported a combined net profit of Bt63.7b, down 1% yoy and 3% qoq.
- Maintain OVERWEIGHT on the sector. Top picks are KBANK and KTB.
Analysis
- results in line. In 2Q26, banks under our coverage reported a combined net profit of Bt63.7b, down 1% yoy and 3% qoq, in line with our and market’s expectation. Net interest income (NII) dropped 7% yoy and flat qoq. NIM stabilised qoq at 3.42% in 2Q26. Meanwhile, non-interest income (non-II) jumped 13% yoy but remained flat qoq. The banking sector’s pre-provision operating profit (PPOP) declined 2% yoy and 3% qoq in 2Q26.
- Signs of recovery in NII. In 2Q26, many big banks with high exposure to corporate loans reported a reduction qoq in NII. Meanwhile, small banks, namely KKP and TISCO, saw their NIIs rise 2.6% and 2.3% qoq respectively. Some banks have guided for an improvement in NIM going forward, and that NIM is likely to have bottomed in 2Q26.
- Fee and service income is key to boosting non-II in 2Q26. Banks under our coverage reported an increase of 19% yoy and 1% qoq in net fee and service income. Meanwhile, many banks reported a strong bottom line, driven by strong fee and service income. Banks attributed this mainly to the wealth business, which benefitted from favourable US and domestic stock markets. However, BBL reported a 1% yoy and 2% qoq reduction in non-II due to a decrease in investment gains and minimal support from the wealth business. We expect banks to continue to focus on growing the wealth business to help boost non-II while lending rates remain at low levels.
- Cleaner loan portfolios for the banking sector. The banking sector reported a 13bp yoy and 9bp qoq reduction in credit cost. However, SCB reported a 5bp qoq increase in credit cost due to the impact of large NPL write-offs and sales. Overall, the impact of Middle East tensions had little effect in 2Q26. Together with the Bank of Thailand's upward revision of its 2026 GDP forecast to 2.3%, we still expect to see a further improvement in banking asset quality and credit cost quarter by quarter in 2H26.
- A possible increase in dividend payout ratio. We expect banks to at least maintain their dividend payout ratio (DPR) in 2026. TTB guides that the remaining budget from its share buyback should be utilised wisely. KBANK has utilised 40% of its total share buyback budget and ended the programme early. KKP mentioned that the capital raised from exercising warrants will be used to maximise shareholder returns once KKP’s P/B exceeds 1x. We expect banks’ DPR to increase in 2026.
Highlights
- Banks reported a combined net profit of Bt63.7b, down 1% yoy and 3% qoq.
- Maintain OVERWEIGHT on the sector. Top picks are KBANK and KTB.
Analysis
- results in line. In 2Q26, banks under our coverage reported a combined net profit of Bt63.7b, down 1% yoy and 3% qoq, in line with our and market’s expectation. Net interest income (NII) dropped 7% yoy and flat qoq. NIM stabilised qoq at 3.42% in 2Q26. Meanwhile, non-interest income (non-II) jumped 13% yoy but remained flat qoq. The banking sector’s pre-provision operating profit (PPOP) declined 2% yoy and 3% qoq in 2Q26.
- Signs of recovery in NII. In 2Q26, many big banks with high exposure to corporate loans reported a reduction qoq in NII. Meanwhile, small banks, namely KKP and TISCO, saw their NIIs rise 2.6% and 2.3% qoq respectively. Some banks have guided for an improvement in NIM going forward, and that NIM is likely to have bottomed in 2Q26.
- Fee and service income is key to boosting non-II in 2Q26. Banks under our coverage reported an increase of 19% yoy and 1% qoq in net fee and service income. Meanwhile, many banks reported a strong bottom line, driven by strong fee and service income. Banks attributed this mainly to the wealth business, which benefitted from favourable US and domestic stock markets. However, BBL reported a 1% yoy and 2% qoq reduction in non-II due to a decrease in investment gains and minimal support from the wealth business. We expect banks to continue to focus on growing the wealth business to help boost non-II while lending rates remain at low levels.
- Cleaner loan portfolios for the banking sector. The banking sector reported a 13bp yoy and 9bp qoq reduction in credit cost. However, SCB reported a 5bp qoq increase in credit cost due to the impact of large NPL write-offs and sales. Overall, the impact of Middle East tensions had little effect in 2Q26. Together with the Bank of Thailand's upward revision of its 2026 GDP forecast to 2.3%, we still expect to see a further improvement in banking asset quality and credit cost quarter by quarter in 2H26.
- A possible increase in dividend payout ratio. We expect banks to at least maintain their dividend payout ratio (DPR) in 2026. TTB guides that the remaining budget from its share buyback should be utilised wisely. KBANK has utilised 40% of its total share buyback budget and ended the programme early. KKP mentioned that the capital raised from exercising warrants will be used to maximise shareholder returns once KKP’s P/B exceeds 1x. We expect banks’ DPR to increase in 2026.
OVERWEIGHT (Maintained)
Analyst
Analyst
Panjarat Thaweesriprasert
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