Thai banking system remains resilient with strong capital and liquidity levels. Second quarter of 2024 saw improved profitability, though there is a need to monitor small SMEs, certain businesses, and vulnerable households for potential NPL risk.
Summary
- The Thai banking system remains resilient with robust levels of capital, loan loss provisions, and liquidity.
- The banking system’s profitability in the second quarter of 2024 improved from the previous quarter
- However, there remains a need to monitor the debt serviceability of small SMEs and certain businesses whose performances affected by structural issues and declining competitiveness as well as vulnerable households with slow income recovery. These could cause a gradual increase in NPL, nonetheless well-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 second quarter of 2024, loan growth of the banking system (licensed banks and their subsidiaries) slowed down to 0.3% year-on-year. The overall business loans remained relatively unchanged, while SMEs loans continued to contract, and consumer loans expanded at a slower pace due to rising credit risk.
The banking system’s gross non-performing loans (NPL or stage 3) in the second quarter of 2024 slightly increased to 540.8 billion Baht, equivalent to the NPL ratio of 2.84%, primarily from consumer loans. Meanwhile, commercial banks continued to manage their loan portfolios and provide assistance to debtors. In addition, the ratio of loans with a significant increase in credit risk (SICR or stage 2) stood at 6.50%, increased from the previous quarter from large corporate loans (mainly from debtors who can still meet their contractual debt obligations but are qualitatively classified) and consumer loans. The banking system’s profitability in the second quarter of 2024 improved from the previous quarter, mainly driven by seasonal dividend income, despite higher provisioning expenses.
However, there remains a need to monitor the debt serviceability of small SMEs and certain businesses whose performances affected by structural issues and declining competitiveness as well as vulnerable households with slow income recovery. These could cause a gradual increase in NPL, nonetheless well-manageable with no immediate risk of an NPL cliff. The household debt to GDP ratio in the first quarter of 2024 slightly decreased from the previous quarter due to a slowdown in credit expansion following household debt deleveraging. Meanwhile the corporate debt to GDP ratio slightly increased due to a marginal increase in new debt creation. The overall corporate profitability continued to improve, led by an improvement in manufacturing and tourism-related sectors.
Source : https://www.bot.or.th/en/news-and-media/news/news-20240827.html
