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Published on July 25, 2007

Non-performing loans (NPLs) at the six largest banks increased sharply in the first half due mainly to the economic slow-down.

The banks recorded bad loans before provisioning of Bt407.28 billion at the end of June, up by Bt37.81 billion or 10.23 per cent from December. The banks are Bangkok Bank, Krung Thai Bank, Siam Commercial Bank, Kasikornbank, TMB Bank and Bank of Ayudhya. All saw their bad loans increase.

Bank of Ayudhya posted the highest growth of distressed debts at 31.17 per cent, up by Bt13.59 billion from Bt43.59 billion at the end of last year to Bt57.18 billion in June. It also set aside the largest capital, Bt11.5 billion, among the six banks for bad-debt provision in the second quarter.

Krung Thai Bank recorded the highest NPL increase to Bt101.57 billion from Bt89.69 billion, an increase of 13.24 per cent. The increase was mainly due to the default of one corporate customer. As a result, the biggest state-owned bank set aside extra reserves for bad debts of Bt6 billion in the second quarter.

Bangkok Bank's bad loans grew the smallest amount, by only Bt1.21 billion or 1.36 per cent, from Bt89.12 billion last year to Bt90.33 billion in June. It set aside loan-loss provision in the second quarter of Bt1.42 billion.

Suvarn Thansathit, executive vice president, said his bank's NPL increase came from both new bad debts and NPL re-entries in a 50:50 proportion. Although the bank could reduce distressed loans by a large amount in the first half, there was one particular corporate customer that had been classified as an NPL, he said.

The bank classified President Agri Trading as an NPL in the first half, with a combined credit line of about Bt1.2 billion. The bank will soon negotiate with the customer on a debt-restructuring plan, he said.

For the second half, the bank's NPLs could increase further due to the lower ability to service debts by some corporate customers, including those in the export sector and the sugar industry.  "Some exporters who are bank customers have already sent negative signs on debt payments, though it isn't a big concern yet. The bank is paying close attention to them," Suvarn said.

There are two key customer groups in the sugar industry under legal processes by the bank. Their combined credit line is about Bt1.2 billion. The first, Bang Pong and Nakorn Petch group, is under a process that is expected to be complete this year, while the process of the other group will end next year.

Chartsiri Sophonpanich, Bangkok Bank's president, said it would set aside provision for bad debts in line with the NPL amount. However, the provision would not have an impact on the bank's capital base.

Somruedi Banchongduang

The Nation