Moody’s warns of erosion in profitability

Thai banks’ profitability will deteriorate as interest rates stay low for a prolonged period as the central bank maintains a loose monetary policy to fight the sharp economic downturn caused by the coronavirus outbreak, says Moody’s Investor Service.

Narrowing net interest margins (NIMs), combined with weakening loan growth, will reduce net interest income, the main source of profit for Thai banks, said Moody’s.

Contraction of interest margins and weaker loan growth will hurt banks’ profitability and banks’ NIMs will continue to narrow as monetary easing to counter economic disruptions from the outbreak weighs on asset yields.

“This, combined with weaker loan growth, will erode banks’ net interest income, their dominant source of revenue, and consequently, their profitability,” said the international credit rating agency.

Rated banks earned about 71% of revenue…