Thailand’s banking system has remained resilient in the face of the new wave of COVID-19

According to Ms. Suwannee Jatsadasak, Senior Director of the Bank of Thailand, reported on the performance of the Thai banking system in the first quarter of 2021, according to which the Thai banking system remained resilient with high levels of capital funds, provision for losses on loans and cash to meet loan demand. and growing economic uncertainties related to the new wave of COVID-19.

Credit support measures, combined with revisions to loan classification and provisioning rules, have helped to mitigate the deterioration in the quality of bank loans. Meanwhile, the profitability of the banking system has declined compared to the same period last year due to lower interest income on loans.

The details are as follows:

The Thai banking system‘s capital fund stood at 3,017.2 billion baht, equivalent to a capital adequacy ratio (BIS ratio) of 20.0%. The provision for loan losses remained high at 823.4 billion baht with a bad debt coverage ratio of 149.7%. The liquidity coverage ratio (LCR) stands at 186.5%.

In the first quarter of 2021, overall bank loan growth was 3.8% year-on-year, compared to 5.1% in the previous quarter.

The details of the bank loan are as follows:

Corporate loan (64.3% of total loans) increased 3.0% year-over-year. Growth in corporate loans moderated after an acceleration in loan utilization last year due to the need for liquidity and the change in corporate bond funding. SME loan1 widened quarter-on-quarter, resulting in a weaker year-over-year contraction – even excluding the contribution from the concessional loan program.

consumer loan (35.7% of total loans) grew 5.3% year-on-year, higher than a 4.4% expansion in the previous quarter. This was mainly driven by mortgage lending, consistent with growing demand, particularly for low-rise residential properties, as well as promotional campaigns from developers and a reduction in government fees.

During this time, auto loan rose slightly in line with a contraction in domestic car sales from a year earlier.

Expanded Credit Card Loan compared to the first quarter of last year, when consumer spending was affected by the early stage of the COVID-19 pandemic.

Personal loans grew at a higher rate due to households’ need for cash, reflected in part by an increase in unsecured loans through online platforms and payment cards.

Quality of bank loans in the first quarter of 2021 continued to be supported by financial assistance as well as revisions to loan classification rules. As a result, gross outstanding non-performing loans (NPL or stage 3) increased slightly to 537.1 billion baht, representing an NPL ratio of 3.10%. At the same time, the ratio of loans with a significant increase in credit risk (SICR or stage 2) in relation to total loans stood at 6.41%, compared to 6.62% in the previous quarter.

The banking system recorded a net profit of 43.8 billion baht in the first quarter of 2021, down 12.0% from the same quarter last year.2. This is mainly due to lower interest income on loans. However, net profit increased from the prior quarter due to lower operating costs and provisioning expenses as banks had already built up a high level of provisioning in 2020. As a result, the yield ratio for assets (ROA) increased to 0.80% from 0.32% in the previous quarter. While the ratio of net interest income to average interest earning assets (net interest margin: NIM) decreased from 2.52% to 2.43%.

Bank of Thailand

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