Despite Thailand’s expected economic slowdown next year, Bangkok Bank (BBL) is targeting a 5-per-cent rise in the overall loan portfolio next year, which could be driven partly by estimated growth in loans from foreign operations.
BBL executive chairman Deja Tulananda estimates a part of the bank’s loan growth next year to come from foreign operations. Currently, its lending from foreign operations account for about 18 per cent of total outstanding loans due to increased demand from foreign operations particularly in Indonesia and Myanmar where new investment projects have been launched. New projects extend from hotel, water management, oil fields to power plants.
This year’s loan growth is targeted to be in the range of 3-5 per cent, he said.
Next year’s loan-loss reserve is expected to rise continuously to strengthen BBL’s operations. The current coverage ratio is 180 per cent, sufficient for the new accounting standard – International Financial Reporting Standards 9 (IFRS9).
Deja expressed his concern over the country’s grass roots economy, which is not on the path of recovery yet.
“It may not be exciting for the economy over the remaining two months of this year. The grass roots purchasing power has not recovered yet and has been quiet. We’re not comfortable with this. It could last until next year. Personally, I expect this year’s economy may not get much better despite the government’s stimulus through projects for job creation. Thai exports also are unlikely to get any better this year as the United States has imposed limits. The European economy is not strong. Britain has been trying to exit the European Union and there are many remaining issues. These could be the risks next year,” he said.
If Thailand’s general election is organised with transparency, the country’s image will improve in the eyes of the world and foreign investors will gain confidence to invest in the country, he said.
Thailand is expected to see a 4.2-per-cent growth next year.
Deja warned that next year’s risk to the banking business could be an estimated rise in non-performing loans (NPLs) particularly from the export and automobile sectors, which could see a slowdown, and lower repayment ability as a result of the US-China trade war.
Thai exports in September contracted by 5 per cent year on year, while the Thai agricultural sector has faced drops in crop prices.
“But we’ve not seen any loan default. The bank’s overall [loan] portfolio is not a concern. This year’s bad debt situation is good and there won’t be any big rise. NPLs next year are expected to rise slightly. We’ve controlled mortgages for a long time,” Deja said.
One area of worry is allowing foreigners, particularly Chinese, to do more business in Thailand. If this is not organised well, it could affect Thai SMEs as foreigners may carry lower costs,” Deja warned.