The Thai banking system continues to demonstrate resilience, supported by strong capital buffers, substantial loan loss provisions, and solid liquidity. In the second quarter of 2025, loan growth across the banking system (including licensed banks and their subsidiaries) declined at a moderated rate of -0.9% year-on-year.
📉 Loan Trends
- Overall loan growth contracted by -0.9% year-on-year, but at a slower pace.
- Large corporate loans expanded, while SME and consumer loans continued to shrink due to elevated credit risks.
📊 Credit Quality
- Non-performing loans (NPLs) rose slightly to 554.9 billion Baht, mainly from business loans.
- Consumer loan NPLs declined across all portfolios.
- NPL ratio remained stable at 2.91%.
- Stage 2 loans (significant credit risk) decreased to 6.88%, thanks to better classification of restructured loans.
💰 Profitability & Provisions
- Profitability improved quarter-on-quarter, largely due to seasonal dividend income.
- Provisioning expenses increased to hedge against global trade policy risks.
- Net interest income declined due to:
- Interest rate cuts
- Lower loan volumes
- The “Khun Soo, Rao Chuay” program offering interest rate relief
⚠️ Risks & Monitoring
- Continued need to monitor:
- Tight financial conditions
- Debt serviceability of vulnerable households and businesses
- Impact of U.S. trade policies
- Effectiveness of the “Khun Soo, Rao Chuay” support measures
📉 Debt Ratios & Sector Performance
- Household debt to GDP fell due to slower debt accumulation.
- Corporate debt to GDP also declined, driven by economic growth.
- Profitability year-on-year dropped, despite gains in manufacturing exports.
- Tourism and services sectors remained pressured by low foreign arrivals and weak housing demand.
The banking system’s profitability improved from the previous quarter, mainly due to seasonal dividend income. However, provisioning expenses increased to buffer against potential uncertainties arising from global trade policy risks. Meanwhile, net interest income declined as a result of interest rate cuts, lower loan volumes, and the implementation of the ‘Khun Soo, Rao Chuay’ program, which provided interest rate reductions to borrowers.
