Lower SME demand cuts Q3 loan growth
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The banking industry in the third quarter posted an eighth consecutive quarterly drop in loan growth due to lower demand from small and medium-sized enterprises while large corporates turned to different funding sources, according to the Bank of Thailand.
Lending in the quarter grew by 5.6 per cent year on year, down from the 7.8-per-cent growth in the second quarter.
Jaturong Jantarangs, senior director for the BOT’s Financial Institutions Strategy Department, said the economy had not yet been able to return to normal, while corporates had raised funds through the bond market, some of which had been used for debt repayment to the banks.
As a result, loan growth in the corporate sector of commercial banks in the third quarter declined to 4.5 per cent from 6.6 per cent in the second.
The economic slowdown affect-ed SMEs, reflected by the lower loan growth in this sector. SME loan growth in the third quarter dropped significantly to 4.7 per cent from 8.7 per cent in the previous quarter.
Moreover, loan growth in the household sector normalised after expanding a lot from the government’s first-car-buyer tax incentives. Lending in this sector in the third quarter fell to 8 per cent from 8.8 per cent in the prior quarter.
Households account for 31.1 per cent of total lending in the banking industry.
NPLs
Non-performing loans in commercial banks in the third quarter increased for the third consecutive quarter to 2.34 per cent, compared with 2.28 per cent in the second quarter, driven by consumer finance, especially credit cards and personal loans.
NPLs from credit cards in the third quarter rose to 3.7 per cent from 3.3 per cent in the second quarter and the proportion of bad personal loans increased to 3 per cent from 2.6 per cent.
Total NPLs increased by Bt10.3 billion, to Bt294 billion.
Special-mention loans, those whose repayments are more than over a month late but not more than three months overdue, increased to 2.54 per cent in the third quarter from 2.40 per cent in the second, mostly from consumer finance. Outstanding special-mention loans climbed to Bt319 billion from Bt299 billion in the second quarter.
Despite the rising bad and special-mention loans, the BOT is not worried much as the financial status of commercial banks is strong, with a loan loss coverage ratio of 166.9 per cent.
Net profits of commercial banks in the third quarter totalled Bt53.8 billion, slightly down from the previous quarter, because of a reduction in dividend incomes. However, net profits for the first nine months increased by 6.8 per cent year on year to Bt165.5 billion, attributed to cost management.
Several banks have focused more on current and savings accounts to lower the cost of funds, and in the third quarter, many high-interest-rate deposit products matured, so net interest margin increased to 2.6 per cent.
