# Thai banking system remains resilient with robust levels of capital

- Link: https://www.thailand-business-news.com/banking/142603-thai-banking-system-remains-resilient-with-robust-levels-of-capital
- Published: 2024-05-26T14:49:46+07:00
- Author: SiamNews PR

**The Thai banking system is strong, with high levels of capital and liquidity. 
Profitability improved in Q1 2024, but monitoring is needed for small SMEs and vulnerable
households to prevent NPLs.**

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## Summary

 * The Thai banking system remains resilient with robust levels of capital, loan
   loss provisions, and liquidity. 
 * The banking system’s profitability in the first quarter of 2024 improved from
   the previous quarter.
 * However, there remains a need to monitor the debt serviceability of small SMEs
   and certain vulnerable households with slow income recovery, which could influence
   a gradual increase in NPL but remains manageable with no immediate risk of an
   NPL cliff.

**The Thai banking system remains resilient with robust levels of capital, loan 
loss provisions, and liquidity. In the first quarter of 2024**, the banking system’s
loan growth turned slightly positive at 0.7% YoY, attributed to the expansion of
large corporate loans in manufacturing sector, notably in food, petroleum, and chemical
products. Consumer loans continued to grow at a slower pace across all portfolios,
except auto loans which remained contracted.

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**The banking system’s gross non-performing loans (NPL or stage 3) in the first 
quarter of 2024 increased to 502.6 billion Baht, equivalent to the NPL ratio of 
2.74%**, primarily from corporate loans (partly due to qualitative criteria of the
asset classification) and mortgage loans.

Meanwhile, commercial banks continue their loan portfolio management and provide
assistance to debtors. In addition, the ratio of loans with a significant increase
in credit risk (SICR or stage 2) stood at 6.13%, increased from the previous quarter,
including debtors who still meet their contractual debt obligation but have been
qualitatively classified.

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**The banking system’s profitability in the first quarter of 2024 improved from 
the previous quarter, mainly driven by the reduction of operational costs **and 
provisioning expenses, despite a decline in net interest income due to higher costs
of funds. As a result, the net interest margin (NIM) of the banking system declined.

However, there remains a need to monitor the debt serviceability of** small SMEs
and certain vulnerable households with slow income recovery, which could influence
a gradual increase in NPL** but remains manageable with no immediate risk of an 
NPL cliff. The household debt to GDP ratio in the fourth quarter of 2023 slightly
increased from the previous quarter, while the corporate debt to GDP ratio remained
unchanged due to a gradual economic recovery and a marginal increase in new debt
creation.

The overall corporate profitability continued to improve from the previous year 
but decreased from the previous quarter, led by a slowdown in manufacturing and 
export-related sectors. Meanwhile, certain firms in service sector have experienced
pressure from high costs.

**Source** : [https://www.bot.or.th/en/news-and-media/news/news-20240521.html](https://www.bot.or.th/en/news-and-media/news/news-20240521.html?rand=113190)