Moody’s Investors Service reports that restructured loans have grown substantially in Thailand and Indonesia in recent years compared with the rest of Southeast Asia, but loss buffers remain strong.
“In particular, increases in standard restructured loans, or restructured loans that are still performing, underscore the high latent asset risks present in these two countries, although by different degrees,” vice president and senior analyst Alka Anbarasu said.
“However, in our view, banks in both systems for now also have ample buffers against potential losses from these assets.”
Moody’s conclusions are contained in its just-released report for Thailand and Indonesia, “Restructured loan growth raises asset quality concerns but loss buffers are strong”.
The report does not consider non-performing loans (NPLs) that have been restructured because they are already included in reported NPL data, and Moody’s aim is to highlight asset risks not captured by NPL disclosures.
In Thailand, standard restructured loans increased to a combined 2.9 per cent of gross loans at nine rated commercial banks at end-2016 from 2.4 per cent a year earlier.
In Indonesia, the ratio, also at nine rated commercial banks, increased to 4.6 per cent at end-2016 from 3.3 per cent a year earlier.
As indicated, the ratios of restructured loans in both economies are substantially higher than for other Southeast Asian countries, such as Singapore and Malaysia.