Thailand Consumer Finance: Rising headwinds, turning more selective on the sector

Headwinds are rising for Thailand's consumer finance sector. The BOT Governor announced plans to increase regulation, with a focus on auto title, credit cards, and BNPL. The rate cycle is shifting, with rate hikes a risk to CoF and NIM; and weather-related disruptions could pose asset quality risks over the next 12 months. Valuations are near long-term lows, particularly for auto title lenders, but the threat of regulation should limit re-rating as the impact could be significant (10-14% EPS for 100bps lower auto title yield). With this note, Daniel Andrew Tan assumes primary coverage of MTC, Sawad, Tidlor and KTC. We downgrade Sawad to Neutral and MTC to UW. We remain OW on Tidlor, where RoE improvement is not priced in;