The economic slowdown is affecting the ability of SMEs and households to repay their debt, while lending growth across all categories has slowed due to domestic economic uncertainty, the Bank of Thailand said yesterday.
Anupap Kuvinichkul, senior director of the financial institutions strategy department at the BOT, said loan quality had deteriorated slightly, due to the value of non-performing loans (NPLs) having edged up during the first quarter.
“The prospect of a continuous slowdown of the economy has contributed to poorer loan quality, but this is based on many factors such as the economic situation in the next period, the support from commercial banks, and the adaptation of private businesses and people who use micro-loans,” he said.
The value of NPLs in the system currently stands at Bt279.8 billion, which represents an increase of Bt14.2 billion over the 2013 year-end amount.
This is largely due to a rise in NPLs for both consumer and SME (small and medium-sized enterprise) loans.
The ratios of gross and net NPLs to total lending have also increased slightly, to 2.3 per cent and 1.1 percent from 2.2 per cent and 1 per cent, respectively.
Special-mention (SM) loans – those where repayment is more than one month overdue, but not more than three months – have fallen to Bt288.6 billion from Bt295.6 billion, due to the decrease in corporate and consumer lending. The SM loan ration to total lending has edged down from 2.4 per cent down to 2.3 per cent.
The BOT director said this was because a portion of SM loans had been transformed into NPLs, while banks’ support through extended loan periods and exemption of paying interest on principal also contributed.
As to rising NPLs, Anupap said SMEs were the most worrisome since this group is more fragile to the effects of economic and political volatility. Their lower capital level and a shortage of income due to the slowdown are the main reasons for concern.
While the number of NPLs in the household group has also increased, the fact that banks and individuals have been more careful in giving and taking out loans due to economic uncertainty has made this segment less of a concern than SMEs.
The number of household loan approvals fell to 50 per cent in the first quarter, from 70 per cent at the end of 2012.
“Commercial banks have been wary of NPLs for quite some time, and they are well prepared for the current circumstances,” said Anupap.
Banks have a total of Bt1.8 trillion worth of loans in the system, whereas NPLs account for only 2.3 per cent of them. Their loan-loss reserves of Bt390 billion exceed the level of NPLs by Bt110 billion.
As for credit growth, Anupap said the numbers had slowed in all sectors, especially for auto loans, due to economic uncertainty. However, loan-loss provision and capital remain high.
Loans in the banking systems have expanded by 9.8 per cent, decelerating from 11 per cent last year in line with the slowing economy.
Corporate loans expanded by 9.4 per cent, a similar rate to last year, due to a slowdown in loans to financial, real estate, and commercial businesses. SMs lending expanded by 11.7 per cent, the first slowdown for three years.
Consumer lending grew by 10.7 per cent, down from 12.9 per cent last year, due to the slowdown in almost all sectors.