UBS Bullish on Thai Banking and NBFI Sectors for 2025
The Swiss investment bank UBS has reiterated its positive investment outlook on the Thai financial sector, signaling selective opportunities across both traditional commercial banks and non-bank financial institutions (NBFIs).
This stance is particularly relevant as the Thai financial industry navigates an evolving landscape throughout 2025 and into the following year.
Analyzing the banking sector, UBS places Krungthai Bank (KTB) with a high conviction “Buy” rating, primarily based on the bank’s successful loan de-risking initiatives and a notably robust coverage ratio.
The Loan Loss Reserve to Non-Performing Loan ratio (LLR/NPL) comfortably exceeds 200% at KTB.
Analysts from the firm project that any potential gains realized from the large-scale, ongoing Thai Airways debt restructuring process could serve as an additional tailwind.
This would facilitate a sustainable reduction in credit costs and minimize non-performing asset impairment charges.
These factors are collectively expected to position KTB for above-peer profitability and allow the bank to maintain a reliable and sustainable dividends per share (DPS) payout throughout the 2025–2026 financial period.
Kasikornbank (KBANK) is another major player that receives a favorable “Buy” recommendation from the prominent investment firm.
UBS acknowledges that prevailing economic uncertainties have necessarily postponed the expected normalization of credit costs until the medium term.
However, the bank’s current shareholding situation is viewed as a potential internal motivator for management to aggressively pursue measures designed to enhance overall shareholder returns.
Key drivers highlighted for value creation include sustained improvements in operating efficiency metrics, judicious and prudent capital management strategies, and the strategic unlocking of underlying value held within its subsidiary businesses.
Selective Opportunities and Rating Shifts in Thai Banking
In its detailed sector analysis, UBS has adopted a more constructive view on TMBThanachart Bank (TTB), upgrading its rating to a “Buy.”
This upgrade follows a recent correction in the bank’s share price, which analysts believe has led to a much more attractive valuation profile and higher prospective dividend yields.
The possibility of the bank undertaking additional share repurchases in early 2026 is identified by the firm as a distinct catalyst that could provide significant further upside to the share price.
Contrarily, Bangkok Bank (BBL) is assigned a “Neutral” rating, a reflection of its current under-owned status in institutional portfolios and the lagging performance of its share price observed since 2024.
UBS does concede that there is scope for BBL’s relative performance to improve if investors shift capital away from banks that have recently outperformed the market.
However, the investment thesis is moderated by several headwinds, including the risk that faster-than-anticipated US interest rate cuts combined with a higher rate of Thai policy rate pass-through into 2026 could exert downward pressure on Net Interest Margins (NIM).
Additional concerns restraining a more positive outlook stem from BBL’s persistently higher operating cost base and its historically conservative dividend policy, both of which are seen as capping its Return on Equity (ROE) and overall market valuation.
Similarly, TISCO Financial Group (TISCO) is rated “Neutral.”
While TISCO is lauded for offering a high and sustainable dividend yield projected to be around 8% for 2025–2026, UBS views the firm’s existing valuation premium, relative to its larger commercial bank peers, as a limiting factor that restricts potential appreciation.
Furthermore, the analysts identify emerging headwinds from the domestic auto industry as potential medium- and long-term risks that warrant caution.
Conversely, Kiatnakin Phatra Bank (KKP) receives a “Sell” rating, with the firm arguing that current valuations already fully incorporate recent positive developments, such as its share buyback program and the recent profit recovery.
UBS analysts predict that improvements in non-interest income (non-NII) and the reduction in losses realized from car repossessions have likely reached their peak.
Potential dilution stemming from warrant exercises and the bank’s heightened exposure to the used-car hire-purchase loan segment, alongside the broader auto industry risks, are cited as significant challenges.
Positive Momentum in Non-Bank Financial Institutions (NBFIs)
Shifting focus to the Non-Bank Financial Institutions (NBFIs) segment, UBS identifies several compelling investment cases, highlighting strategic opportunities outside of traditional commercial lending.
Bangkok Commercial Asset Management (BAM) is a prominent pick, receiving a “Buy” rating, largely due to the firm’s return to attractive valuations and the forecast for a sustainable 7% dividend yield spanning the 2025–2027 period.
The bank anticipates renewed growth momentum for BAM, driven by major non-performing loan (NPL) resolutions currently underway and the establishment of new joint-venture Asset Management Company (AMC) setups, particularly expected to gain traction in 2026.
These developments are projected to strongly support the recovery of BAM’s return on equity metrics.
Other preferred NBFI picks include Srisawad Corporation (SAWAD), which also secures a “Buy” recommendation. UBS considers current market valuations for SAWAD to be excessively pessimistic regarding the actual asset quality risk profile.
Analysts believe a discernible recovery in both profitability and overall asset quality metrics has the potential to drive profit growth of approximately 10% in 2026.
For Ngern Tid Lor (TIDLOR), the investment firm anticipates continued double-digit profit growth, specifically projecting a robust 16% growth rate for 2026, underpinned by enhanced credit quality control mechanisms.
The recent removal of the risk overhang associated with potential divestment is viewed as a positive development that will bolster the firm’s long-term premium valuation.
On the other hand, Muangthai Capital (MTC) is rated “Neutral,” as its relatively lofty current valuation appears to have already priced in expectations of above-peer profit growth throughout 2025. UBS anticipates a slowdown in MTC’s profit growth during 2026 due to an expected leveling off of NPL formation rates and limited scope for further improvements in its cost-of-funds.
Contrarian Dynamics in Thai Financial Sector Positioning
The UBS assessment fundamentally reflects the bifurcated outlook for the Thai economy, where subdued GDP growth—forecasted around 1.6–2.2% for 2026— creates an imperative for investors to seek alpha through idiosyncratic stock stories rather than broad sector exposure.
The “Buy” rating for state-owned KTB, despite the prevailing credit weakness, is a powerful signal that the market is willing to re-rate banks based on the completion of major non-performing credit events.
The expected reclassification of Thai Airways’ loans from non-performing to performing status in late 2025 will immediately reduce KTB and BBL’s NPL ratios and free up substantial general provisions, a critical technical catalyst that drives above-peer profitability and justifies the firm’s selective positioning.
Conversely, the cautious “Neutral” rating for BBL, despite its strong capital, highlights a deep-seated institutional preference for higher returns on equity (ROE) and dividend payouts—metrics where BBL’s conservative policies lag behind its more shareholder-friendly peers.
Furthermore, the strength shown in the NBFI sector, particularly NPL managers like BAM, underscores the counter-cyclical nature of bad debt resolutions, suggesting that the lingering impact of Thailand’s elevated household debt (estimated at over 90% of GDP) will continue to generate highly profitable asset clean-up opportunities well into 2027.
This validates UBS’s focus on specialized financial institutions that benefit from ongoing economic stress.
