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BOT upbeat on H2 credit growth

The Bank of Thailand (BOT) said credit expansion in the second half of the year could be greater than in the first half because of the apparent recovery of the economy, while Special Mention (SM) loans have slightly increased from the previous quarter with the potential to continue increasing in the next quarter.

Anupap Kuvinichkul, BOT senior director of Financial Institution Policy Group, said credit growth continued to slow down at the beginning of the second quarter but picked up towards the end of the quarter.

He said commercial banks had set a credit growth target of 8-10 per cent at the beginning of the year but changed it to 6-8 per cent by the end of the first quarter due to the economic slowdown. Banks were looking at lowering the target even further at the start of the second quarter because of the prolonged political stalemate. However, after the political situation stabilised and the economy showed signs of recovery, most commercial banks have decided to maintain their loan-growth target at 6-8 per cent and it has been on an upward trend since the end of the second quarter.

"After seeing the increase in credit growth by the end of the second quarter, the BOT believes that loan growth in the second half of the year will expand at a much better rate than in the first half of the year," said Anupap.

He revealed that credit expanded by Bt86 billion in the first quarter and by Bt120 billion in the second quarter, especially in the last two months of the quarter that saw a Bt100-billion increase. However, credit expansion has continued to slow down, by 7.3 per cent, year on year.

Anupap said consumer loans have the highest potential for growth in the second half of the year following the economic recovery, but loans for cars will remain subdued. Loans to small and medium-sized enterprises also have potential for growth following the policies of commercial banks and the government to support SMEs.

Meanwhile, gross non-performing loans (NPLs) and net NPLs have remained steady at 2.3 and 1.1 per cent, respectively, when compared to the previous quarter but SM loans (loans overdue for more than one month but not more than three months) have risenslightly by Bt9.6 billion (2.4 per cent) to Bt298.2 billion outstanding.

Anupap said commercial banks increased the amount of reserves by Bt8.6 billion due to the rise of SMs in the second quarter, which brings the total reserve to around Bt400 billion. Of that, Bt160 billion is considered as excess reserve, which means commercial banks have a substantial buffer against any potential deterioration of loan quality in the future and a considerable increase of the reserve is also less likely.




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