Commercial banks' combined earnings in the first nine months soared 19 per cent year on year to Bt134.7 billion, despite a drop in business loans.
Anupap Kuvinichkul, a senior director for the Bank of Thailand on financial institutions’ strategy development, said Thai banks had demonstrated greater financial strength with an average capital adequacy ratio of 15.9 per cent (including 11.9 per cent as Tier 1 capital). Several banks issued subordinated debentures to strengthen their Tier 2 capital ahead of the activation of Basel III standards next year.
“The [capital] levels are high and supportive of further economic expansion,” he said.
In the third quarter, banks showed combined net profit of Bt4.2 billion, down 8 per cent from the previous quarter, because of higher loan provisions and higher taxes. Net interest margin eased to 2.54 per cent.
In the quarter, they showed 14.2-per-cent loan growth from the same period last year. Business loans, which accounted for 70 per cent of the total portfolio, slowed slightly from the second quarter but still showed 12.5-per-cent growth from the third quarter last year. This was largely driven by demand in the infrastructure and commerce sectors, and by small and medium-sized enterprises.
While business loans eased, consumption loans, which contributed 30.1 per cent of the total, expanded by 18.4 per cent year on year, mainly thanks to car financing on the back of the government’s first-car-buyer scheme.
While mortgage growth in the quarter expanded at the same level as in the second quarter, consumer loans slowed slightly as post-flood consumption demand eased.
Banks’ deposits and bills of exchange expanded by 12 per cent year on year. This brought down the ratio of deposits plus B/Es to loans to 91.4 per cent.
Banks raised Bt28.5 billion through subordinated debentures in the quarter and mobilised US$2.2 billion (Bt69 billion) through dollar-denominated bonds.
At the end of September, non-performing loans stood at Bt264.6 billion, showing a net increase of Bt1.8 billion. However, thanks to the enlarged loan base, NPLs accounted for only 2.4 per cent of total loans.
BOT Governor Prasarn Trairatvorakul said the biggest challenge for the country’s monetary policy was to balance the policy rate, and the central bank had observed that the correct balance had been nearly achieved as the Thai economy had been growing and the inflation level was not under pressure.
However, factors of concern include the expansion nationwide of the Bt300 minimum wage and the restructuring of the energy-price structure. In addition, there are external factors overseas, including the economic problems in the United States and Europe, which are dynamic and need to be monitored continuously by the central bank’s Monetary Policy Committee.
“The interest rate is quite balanced and the overall economy is getting close to its potential level. Inflationary pressure is not too high. Loan growth is moderate,” Prasarn said.