The credit costs of Kasikornbank (KBank) rose by nearly 20 basis points quarter-on-quarter in the second quarter, a function of higher loan-loss provisions, while the country's fourth-biggest lender by assets also raised its bad-loan target for the full year.
KBank's credit costs grew to 120 basis points in the second quarter from 104 in the first, and the bank has also revised up its target for such costs to 150 basis points due to greater risk in the second half, executive vice-president Adit Laixuthai said.
He did not elaborate on how much provision was set aside during the April-June quarter.
An increase in credit costs is linked to default rates, as banks must increase provision spending to cover potential losses.
Mr Adit said the bank also raised its non-performing loan (NPL) ratio target to between 2.7% and 2.8% at year-end from 2.26% at the end of March.
KBank, Thailand's biggest SME lender, has high exposure to small and medium-sized enterprises, with 560 billion baht in loans.
Its outstanding loans totalled 1.55 trillion baht at the end of March.
The Bank of Thailand earlier warned NPLs for SME and retail loans would continue to rise in the second quarter.
State-owned Krungthai Bank (KTB) in May fuelled investor worries over the rising level of NPLs and a possible repeat of disappointing earnings in the second quarter by setting aside normal and additional reserves to the tune of 3.6 billion baht in April alone.
The announcement triggered panic selling of bank shares as investors fretted over disappointing earnings.
Apart from higher credit costs, bank earnings are cramped by a narrower net interest margin (NIM) after recent lending-rate cuts that followed in the footsteps of the central bank's 25-basis-point cut in late April.
"Despite the higher bad-loan projection, it's manageable, and the bank is ready to provide financial assistance to customers hurt by the economic slowdown," Mr Adit said.
"We expect the country's economy will gradually improve in the second half."
He said KBank would maintain its targets for NIM, cost-to-revenue ratio and revenue growth.
Management expects 6% lending growth, a 45% cost-to-revenue ratio, NIM in a range of 3.5% to 3.7% and non-interest revenue growth of 10-12%.
All targets are based on an assumption of 2.8% GDP growth in 2015.
KGI Securities estimates KBank set aside 4.16 billion baht in the second quarter, up from 4 billion in the first quarter.
Securities analysts are speculating that Siam Commercial Bank (SCB), the country's third-biggest lender by assets, also beefed up provisions in the second quarter.
Maybank Kim Eng Securities (Thailand) estimates loan-loss provisions of 4.16 billion baht for SCB in the second quarter, up by 15.8% quarter-on-quarter and 29.4% year-on-year.
The broker also predicts an 8% quarter-on-quarter decline in net profit at SCB and an 11% drop for KTB.
KBANK shares closed yesterday on the Stock Exchange of Thailand at 180.50 baht, up 1.50 baht, in heavy trade worth 3.31 billion baht.