Krung Thai Bank likely to miss loan growth target for 2024: analyst

Government loan demand will rise but yield will be lower.

Krung Thai Bank (KTB) may see a softer net interest margin (NIM) in the second half of 2024, with the bank warning that it will miss its loan growth target for the year, according to UOB Kay Hian.

The Thailand-based bank's loan portfolio contracted 0.7% in H1. Whilst KTB guided that there will be incoming loan demand from the government in H2, the bank is also in the process of lessening its loan exposure to small and medium enterprises.

Whilst the incoming government loan will provide a clean asset quality, it will deliver a lower yield, said UOBKH analyst Thanawat Thangchadakorn.

KTB maintains its NIM target at 3% to 3.3%, having delivered a 3.35% NIM in the first six months of 2024.

KTB expressed confidence that it will meet its 2024 credit cost target, even taking into account a loan it extended to a large corporation in the renewable energy industry. The bank reportedly had not set aside provisions for this loan.

However, the non-performing loan (NPL) ratio may increase in H2 due to legacy loans, Thangchadakorn said. New NPL formation for the new loan is expected to be minimal.

KTB is also seeing some deterioration in the retail lending segment, but this has not yet reached an alarming level, according to Thangchadakorn.