Moody’s Ratings recently spiced things up for Thailand’s financial scene, and not in the way anyone was hoping. The renowned ratings agency shifted the outlook of seven major Thai financial institutions from stable to negative. This somber list reads like a who’s who of Thailand’s banking heavyweights: Bangkok Bank (BBL), Krungthai Bank (KTB), Kasikornbank (KBank), Siam Commercial Bank (SCB) along with its tech-centric partner SCB X, TMBThanachart Bank (ttb), and the Export-Import Bank of Thailand (EXIMT).
This twist of fate didn’t appear out of thin air. Just a day prior, Moody’s put the spotlight on Thailand’s government, switching its outlook to the chilling label of negative. The backdrop to this drama is Thailand’s Baa1 sovereign rating’s outlook dropping to negative, signaling storm clouds over its economic and fiscal fortitude. This comes amid a whirlwind of global trade tensions and new US tariffs, contributing to the world’s ongoing uncertainty cocktail.
As if the coronavirus pandemic hadn’t shaken things up enough, this economic downturn could really stir the pot for Thai banks. Loan growth is sluggish, while asset quality concerns linger. This not only challenges the banks’ credit profiles but also puts a strain on the Thai government’s ability to play the knight in shining armor, should the banks cry for help.
Moody’s clarifies that if Thailand’s sovereign rating takes another hit, the seven banks could find themselves facing rating downgrades. Currently, their long-term deposit and issuer ratings are perched on a hill supported by government backing, which would come crashing down in sync with a sovereign downgrade.
The agency made it known it wouldn’t hesitate to downgrade the banks’ ratings if Thailand’s sovereign score drops. The same fate awaits should there be a significant slip in the banks’ individual creditworthiness or if the domestic banking environment takes a nosedive. For now, the idea of an upgrade feels like a distant dream, given the gloomy aura surrounding their outlooks.
But not all hope is lost. Moody’s might revise their outlook back to stable if Thailand’s sovereign status holds firm at Baa1, with a renewed stable outlook. This could offer a glimmer of hope amid the murkiness currently clouding the financial skies.
Bangkok Bank, Krungthai Bank, Kasikornbank, Siam Commercial Bank, and TMBThanachart Bank are all major players on the domestic scene, fitting the bill of Domestic Systemically Important Banks. Only Krungsri (Bank of Ayudhya), with a significant 76.88% stake owned by Japan’s MUFG Bank, dodged this particular bullet. Meanwhile, EXIMT stands its ground as a state-owned entity, amid these tumultuous economic tides.
Wow, this is serious! Could this be the start of a big crisis for Thai banks?
I think the banks have been through worse, but it’s tough for sure. The global situation isn’t helping.
True, but what about the government? Can they support the banks if it gets worse?
The government will struggle because they have their own fiscal challenges. It’s not looking great.
Thai banks are resilient, but I’m worried about loan growth. It’s really sluggish.
Loan growth is essential for economic development. If it continues to stagnate, the banks will face more problems.
Honestly, I think Moody’s is just trying to stir the pot. The Thai economy is stronger than they think.
Do you really believe that? The global trade tensions and US tariffs are real threats.
Sure, but every crisis opens new opportunities. Thai banks just need to adapt.
This negative outlook will definitely affect investor confidence. I’m considering moving my investments.
Diversification might be a good idea, but moving everything might be drastic.
True, but act carefully. Sometimes it’s best to see how things unfold.
Didn’t we learn anything from past financial crises? We need to have better safeguards in place.
Unfortunately, history seems to repeat itself. But maybe this time the safeguards will hold.
The fact that Krungsri is doing fine with MUFG support is interesting. Shows how international ties can help.
International ties are definitely beneficial, but over-reliance can also be risky.
Agree. Maybe other banks could learn from their strategy.
I still don’t trust ratings agencies. They should be more transparent about their criteria.
Transparency is indeed important, but they must have some valid reasons.
Tom, it’s not just about trust. They provide a perspective based on data analysis.
How do the new US tariffs factor into this situation for Thailand?
Tariffs can hurt exports, which can weaken the economy and impact banks’ operations.
If the sovereign rating drops again, the repercussions will be far-reaching. Buckle up!
The whole situation is a mess. Global markets are so interconnected now, it’s scary!
If we can weather the COVID-19 economic impacts, we must use that experience to navigate this too.
The international banks should step up assistance to maintain stability in Thailand.
Are there any signs that things will improve soon? What’s the government’s plan?
The government needs to stabilize the situation, but I haven’t heard any concrete plans yet.
Thailand is more resilient than many give it credit for. Let’s see how they play their cards.
My money is on Kasikornbank. They’ve been conservative, and I think it’ll pay off.