Analysts have revised up the banking sector's earnings outlook after the impact from fee cuts was less severe than initially expected.
The postponement of the official adoption of the International Financial Reporting Standard 9 (IFRS 9) adds to the improving picture for the banking sector.
Most of the 11 SET-listed banks managed to deliver a higher net profit in the second quarter, though the waiver of online transaction fees dealt a blow to fee and service income.
The 11 banks' cumulative net profit for the April-to-June quarter was 55.3 billion baht, up 16.6% year-on-year and 24.5% from the previous quarter.
Among the four largest banks, Siam Commercial Bank (SCB) was the only one that saw its net profit drop in the second quarter.
The government has also decided to delay implementation of stringent new accounting rules to January 2020 to prevent any adverse impact on businesses.
Banks' profit rise has largely been attributed to higher interest income, along with loan growth and lower loan-loss provisions, while much of the quarterly growth has chiefly derived from higher income from other activities like gains on investments for Bangkok Bank and Kasikornbank and bancassurance fee income for Siam Commercial Bank, said Adisorn Muangparnchon, an analyst at Philip Securities Thailand.
These gains have helped to offset the full-quarter impact from the digital transaction fee waiver felt by several banks, Mr Adisorn said.
With positive profit growth, Phillip Securities Thailand has upgraded the banking sector's outlook to overweight from underweight, except for TMB Bank.
"But the impact of the profit downgrade for TMB gives the company an excuse to cut the sector's profit forecast for this year to 210 billion baht, which still implies growth of 14.8% from the year before," Mr Adisorn said. "Despite a cut in the sector's profit outlook, we have upgraded the sector's rating to 'overweight' on expectations that loan growth will gather speed and loan-loss provisions will decline."
Capital Nomura Securities also has a positive view of the banking sector after net interest margin (NIM) increased 3.4% in the first half.
But NIM is expected to slightly decline this half because of expected interest rate hikes by the US Federal Reserve, said Capital Nomura Securities.
Most Thai banks are maintaining a cautious view and are still conservative on new lending in high-risk sectors, with medium and small banks raising deposits more than loans, KGI Securities said in a research note.
Apart from sluggish loan growth, most banks saw a slight increase in their deposit bases, with the exception of Krungthai Bank, which posted net deposit outflow of -2.7% from the previous month and -1.2% year-to-date.
After reducing exposure in fixed-income investment three months ago, most big banks turned back to trading fixed-income securities in May, particularly Bangkok Bank, Kasikornbank and Thanachart Capital, KGI Securities said.
The move partly reflects a shift in excess liquidity from money market activity to fixed-income investment, it said.