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Published on October 16, 2007

The Kingdom's largest bank has gross non-performing loans (NPLs) of 9 per cent of its loan portfolio and they may stand at around 8 per cent by year-end, said senior executive vice president Suvarn Thansathit.

The bank has overestimated the economic situation and the level of debt restructuring with customers. "We earlier predicted that the economic environment in the second half would be better than the first half, but it hasn't improved significantly. The bank might fail to complete debt-restructuring negotiations with one of our large borrowers, though it is hoped they can be completed this year," he added.

Even though the bank's new NPLs have increased, this is in line with loan expansion. New bad debts normally account for around 0.5 per cent of loans or about Bt5 billion per quarter.

Suvarn said the interest rate was another key factor affecting debt-restructuring talks. It is even more important for debtors to be able to make profits and service their debts.

Recently, economists were critical that the banks' minimum lending rate (MLR) had decreased slowly, even though the policy signal rate has reduced significantly by 1.75 per cent since early this year. The MLR of the big banks has reduced by only 0.625 per cent over the period.

Apisak Tantivorawong, chairman of the Thai Bankers Association, said banks' MLR may decrease this year but the size would depend on each bank's funding costs. If the Bank of Thailand cut its policy rate, banks' deposit rates would follow suit.

Somruedi Banchongduang, The Nation