Large local banks are aiming to increase their return on equity (ROE) to maximise profitability over the next few years. However, the financial ratio of the Thai banking industry remains relatively low compared to regional peers.
According to Kasikornbank (KBank) executive Kattiya Indaravijaya, KBank plans to boost its ROE to double digits by 2026, up from the current 9.47%. One strategy to improve this ratio is to reduce credit costs.
As part of this effort, the bank aims to limit non-performing loans to no more than 3% by 2025, down from around 3.2% at present, she said.
KBank, Thailand's third-largest lender by total assets, is also focusing on enhancing its overall business efficiency, particularly through the adoption of artificial intelligence (AI). The bank typically allocates 10% of its net profit each year to technology investments.
"With AI development, we aim to strengthen our capabilities and achieve our goal of raising ROE to double digits as targeted," Ms Kattiya said.
Siam Commercial Bank (SCB), the country's fourth-largest bank, is also targeting double-digit ROE. As of September this year, SCB's ROE stood at 12.1%, the highest in the industry.
SCB chief executive Kris Chantanotoke recently stated that fee-based income, especially from wealth management services on digital banking platforms, will be a key driver of the bank's revenue amid marginal loan growth.
Under its "Digital Bank with Human Touch" strategy, SCB plans to boost digital revenue to 15% of total income in 2024 and 25% in 2025. With these initiatives, the bank expects to see an improvement in ROE next year.
Meanwhile, Bangkok Bank is also working to improve its ROE by leveraging all its business segments, including its regional banking operations.
Currently, international banking contributes around 25% of the bank's total revenue, and this ratio is expected to remain stable over the next few years, according to president Chartsiri Sophonpanich.
Separately, Parson Singha, senior director for financial institutions at Fitch Ratings Thailand, noted that local large banks are likely to achieve double-digit ROE in the coming years, with improvements driven by credit cost control.
On average, the ROE of the Thai banking sector is around 8-9%, which is relatively low compared to regional peers, though it is similar to Malaysia's 9%.
In contrast, the financial ratios of the banking sector in Singapore, Indonesia and Vietnam are in double digits, recorded at 15%, 17% and 18%, respectively.
Digital banking is a key strategy for strengthening business capabilities, and Thai banks are moving forward in this direction.
Additionally, fee-based income will play a significant role in driving revenue growth for the banking industry next year, despite marginal loan growth.
"Local banks will face higher challenges amid slower economic and loan growth. We anticipate total loan growth in the banking sector to be marginal, at around 2%, next year," said Mr Parson.