Krung Thai Bank (KTB) president Apisak Tantivorawong said last week he was concerned the bank might not meet its target of cutting its ratio of non-performing loans (NPLs) to 8 per cent of total lending by the end of the year, due to several risk factors.

"There are still uncertainties about the country's political and economic situation. So our bad-loan reduction plan for this year will be a hard work. The bank's percentage of NPLs in the second quarter fell from the first quarter, but the percentage of late payments increased," Apisak said.

If borrowers fail to service debts for two consecutive months, the bank takes immediate action, he said. As a result, it was able to limit its bad loans - defined as loans that are delinquent for three consecutive months - in the first half.

NPLs at KTB, the country's largest state-owned bank, totalled Bt91.91 billion, or 9.67 per cent of total lending at the end of June,

down from Bt95.83 billion, or 10.21 per cent of lending, at the end of March.

Khunying Jada Wattanasiritham, CEO and president of Siam Commercial Bank (SCB), said last week that her bank's NPLs at the end of June rose about Bt3 billion from the first quarter, mainly due to the economic slowdown.

The third-largest bank has set a target of reducing NPLs to 7 per cent of total lending by year-end, from 9.33 per cent at the end of last year. Jada admitted, however, that it will be difficult to meet the target due to the slowing economy.

SCB plans to sell about Bt10 billion of its NPLs to investors, in tranches of Bt1 billion to Bt2 billion. It is in talks with several investors, including Bangkok Commercial Asset Management, to sell the NPLs. Foreign investors who had previously bought bad loans from the bank have also expressed interest in buying more.

Kasikornbank president Prasarn Trairatvorakul echoed Apisak, saying he lacked confidence that the bank would be able to reduce its bad loans to the target of 5 per cent of lending by the end of the year, from 8.5 per cent at the end of last year.

The state of the economy and a higher late-payment ratio raised doubts the target will be reached, he said.

The number of borrowers who have fallen behind on payments by one or two months has risen, Apisak said. Banks count loans with late payment of more than 90 days as NPLs. Kasikornbank had been cutting its NPL ratio by about 2 percentage points a year.

Somruedi Banchongduang

The Nation