Thailand’s banking system remained resilient with high levels of capital funds, loan loss provisions and liquidity play an important role in assisting borrowers and meeting demand for loans to support economic recovery amid uncertain COVID-19, the Bank of Thailand’s latest press release said.
Credit support measures, together with revisions to loan classification and provisioning rules, have helped to mitigate the deterioration in the quality of bank loans. At the same time, the profitability of the banking system improved compared to the same period last year, mainly due to lower provisioning charges as well as effective cost management. The details are as follows:
The Thai banking system‘s capital fund stood at 3,024.8 billion baht, equivalent to a capital adequacy ratio (BIS ratio) of 19.9%. The provision for loan losses remained high at 872.0 billion baht with a bad debt coverage ratio of 155.0%. The short-term liquidity ratio (LCR) stood at 186.8%.
In the third quarter of 2021, banks‘ overall loan growth was 5.6% year-on-year, compared to 3.7% in the previous quarter. Bank loans continued to grow from last quarter, even excluding government loans and financial relief measures.
Business loans increased by 6.3% year-on-year
Business loans increased 6.3% year-on-year due to an increase in large corporate loans1 in almost all sectors as well as loans to the government. This reflects the financing needs of companies following the easing of containment measures and the improvement of economic activities linked to the reopening of the country. In addition, SME loans2 continued to grow mainly due to the rehabilitation credit program.
Consumer loans increased 4.2% year-on-year, compared to 5.7% in the previous quarter
Growth in car loans and credit card loans contracted slightly, due respectively to a reduction in domestic car sales and lower credit card spending during the lockdown measures. Mortgage lending grew at a slower pace as demand for residential properties fell. Personal loans grew at the same pace as in the previous quarter, following an increase in household liquidity needs.
Bank lending quality in Q3 2021 weakened only slightly
The quality of bank loans in the third quarter of 2021 weakened only slightly, supported by financial assistance as well as revisions to loan classification rules. Gross non-performing loans (NPL or stage 3) increased to 546.3 billion baht, equivalent to the NPL ratio of 3.14%. At the same time, the ratio of loans with a significant increase in credit risk (SICR or stage 2) to total loans stood at 6.69%, compared to 6.34% in the previous quarter.
The banking system recorded a net profit of 38.5 billion baht in the third quarter of 2021, up 45.1% from the same quarter last year. This was mainly due to lower provisioning charges as banks made a high level of provisions in 2020, coupled with effective cost management by banks.
At the same time, net interest income increased slightly due to loan expansion. However, compared to the previous quarter, net profit decreased due to non-interest income following a decline in dividend income from the high level of last quarter, as well as an increase in expenses. provisioning. Consequently, the rate of return on assets (ROA) decreased to 0.69% from 1.09% in the previous quarter. At the same time, the ratio of net interest income to average interest-earning assets (net interest margin: NIM) remained stable at 2.47%.
Source: Bank of Thailand