Fitch slashes assessment for banking sector to neutralFitch Ratings has downgraded the outlook for the Thai banking sector to neutral from improving, citing a subdued pace of economic recovery that is likely to constrain earnings growth. The Thai banking system's operating profit to risk-weighted assets ratio increased to 1.9% in 2023 from a pandemic low of 1.2% in 2020, driven by rising interest rates and reduced credit costs. Hence, rating downside would depend on changes in our assessment of extraordinary support prospects," said Fitch Ratings. Fitch expects Thai banking groups to increasingly seek other business opportunities, such as in non-bank financial institutions or overseas expansion, which could impact their risk profiles. Thai banks have been bolstering their defences in anticipation of a likely rise in non-performing loans.
