We maintain an “Overweight” weighting on the banking sector, driven by strong fundamentals of our covered bank stocks. Despite a mixed outlook for 3Q24E, we remain optimistic about the sector’s long-term prospects. Our projections for 3Q24E aggregate net profit indicate a YoY increase of +3% to Bt52bn, primarily driven by tax benefits for TTB (approx. Bt1.1bn), higher fee-based income for KTB, and lower provisions for KBANK. However, a seasonal decline in investment gains is expected to lead to a QoQ decrease of -3%. SCB stands out with both YoY and QoQ profit growth (+5% YoY, +1% QoQ), primarily due to a Bt400mn gain from the disposal of Robinhood. TTB (+13% YoY), KBANK (+7%), and KTB (+6%) are also expected to deliver YoY profit growth, while TISCO (-10% YoY, -3% QoQ) and BBL (-3% YoY, -7% QoQ) are projected to face declines both YoY and QoQ due to reduced investment gains. Total loans are expected to contract slightly -2% YoY and -1% QoQ in 3Q24E due to repayments from large businesses and the government sector. Meanwhile, the NPL ratio is projected to rise slightly to 3.19% from 3.13% in 2Q24 but remains at a manageable level.

Our aggregate net profit estimates for 2024E and 2025E remain unchanged at Bt205bn (+5% YoY) and Bt217bn (+6%). Loan-loss provision is forecasted to decrease -10% compared to a +17% surge in 2023, while the policy rate is expected to reduce by 50 bps by 1H25E.

SETBANK has gained 6% and 13% over the past three and six months due to substantial funds flowing into Thai equities. Its current valuation of 0.7x 2024E PBV remains attractive, offering a discount of -1.0 SD compared to its 10-year historical average. Within the banking space, KBANK (BUY, Target price: Bt176.00) and KTB (BUY, Bt23.00) are our top picks. KBANK’s improved asset quality and compelling valuation (0.65x vs. sector’s 0.62x and SCB’s 0.8x) make it attractive. KTB is expected to deliver the highest net profit growth of +15% YoY in 2024E, reaching Bt42bn, driven by lower provisioning and its focus on lower-risk state lending.