Thai banks saw their net profits increase by 5% year-on-year in the second quarter of 2025, reaching THB53.3 billion ($1.45 billion). This performance exceeded both UOB Kay Hian’s (UOBKH) and market expectations, largely due to unexpected investment gains.
According to UOBKH analyst Thanawat Thangchadakorn, many banks reported a quarterly rise from financial instruments valued at fair value through profit or loss (FVPL), alongside net investment gains. UOBKH’s investigations revealed that these gains came from realized profits on debt securities that are typically measured at fair value through other comprehensive income (FVOCI) and don’t usually impact the income statement directly.
Outlook for H2 2025 and Rate Cuts
Despite the strong Q2 performance, UOBKH does not expect these significant investment gains to recur in the second half of 2025 due to currently low bond yields. Consequently, they anticipate a softening of net profit for the banking sector in H2 2025.
UOBKH also foresees more interest rate cuts from the Bank of Thailand (BOT), especially following the nomination of Vitai Ratanakorn, the former director of the Government Savings Bank (GSB), as the new central bank governor. Thangchadakorn believes Vitai will likely be more aligned with the government’s fiscal policy and objectives.
However, Thangchadakorn noted that the market might be concerned about the new governor’s potential influence leading to major regulatory changes. The market broadly expects two policy rate cuts, bringing the rate down to 1.25% by the end of 2025. With the new BOT governor’s term starting on October 1, 2025, UOBKH suggests the earliest possible rate cut could occur at the October 8, 2025 meeting.
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