...Operating Conditions Still Challenging: The sector outlook is negative because Fitch Ratings expects banks' earnings and asset quality to remain under pressure from a weak operating environment. Consensus expectations are for improved GDP growth in 2015, but it remains uncertain how quickly the economy can return to robust growth. Performance and Buffers Reasonable: Thai banks' performance has been better than Fitch's earlier expectations, with profitability measures such as ROA and ROE still intact. NPLs have been stable, while Fitch feels there are still risks from previous high credit growth as the loans season. In any case, Thai banks have built up sound buffers in terms of reserve coverage and capitalisation, which provides the capacity to cope with a normal cyclical downturn. Increased Downside from Leverage: The Thai banking sector has been resilient to previous downturns, while a prolonged recession could lead to greater risks ¡ as increased leverage means that households and companies...
