BoT says banking system is hardy

The banking system remains resilient with robust levels of capital, loan-loss provisions and liquidity, according to the central bank.
The latest Bank of Thailand statement revealed in the third quarter of 2024 loan growth in the banking system contracted by 2.0% year-on-year, attributed to high levels of debt repayments, particularly from the government and large corporations.
Despite continued new lending to large corporations in the service, real estate and trade sectors, as well as consumer loans for personal and mortgage lending, the central bank said loans expanded at a slower pace.
Meanwhile, loans to businesses facing competitiveness challenges continued to contract, especially in the petrochemical, electronics and automotive sectors.
The banking system’s gross non-performing loans (NPLs) in the third quarter increased to 553 billion baht, equivalent to an NPL ratio of 2.97%.
This increase was partly attributed to a decline in the loan base and higher NPLs from business and consumer loans, noted the central bank.
Commercial banks continued to manage their loan portfolios and provide support to debtors.
In addition, the ratio of loans with a significant increase in credit risk was 6.86%, increasing from the previous quarter because of mortgages and business loans that had qualitative criteria for assets classification, though debtors can still meet their contractual debt obligations, noted the central bank.
Banking profitability for the third quarter improved year-on-year, mainly attributed to higher fair value through profit or loss, while net interest income decreased.
Compared with the previous quarter, net profit declined because of a reduction in seasonal dividend income, despite lower provisioning expenses.
The debt serviceability of small businesses and certain households with a slower income recovery and elevated debt burden requires monitoring, as well as businesses affected by structural issues and a declining level of competitiveness, noted the regulator.
These could cause a gradual increase in NPLs, though they remain manageable with no immediate risk of an NPL cliff, said the central bank.
The household debt-to-GDP ratio in the second quarter slightly decreased from the previous quarter, reflecting a slowdown in credit expansion as household debtors deleveraged.
The corporate debt-to-GDP ratio decreased following a contraction in loans and debt securities, said the central bank.