BBL to raise provisions in wake of NPL increase in Q1
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BANGKOK Bank has to increase provisions to deal with higher non-performing loans in the first quarter amid the economic slowdown.
“If we have enough profit, we should take additional provisions because the economic circumstances are gloomy and this reflects adversely on the money of people and their ability to pay debt,” Suvarn Thansathit, senior executive vice president, said yesterday.
BBL’s NPL ratio in the first quarter climbed to 2.9 per cent from 2.8 per cent in the previous quarter mainly due to delinquent retail and small business customers.
Corporations are stronger than small and medium-sized enterprises and retail customers but they have to be careful about doing business because the global economy is a factor that needs to be monitored.
However, SME and retail loans are a small part of BBL’s credit portfolio.
The bank recently cut its minimum lending rate (MLR) by 25 basis points to help SME customers. The move might not be of much financial help to the customers but it can give them a psychological uplift.
The bank has seen more business customers requesting debt restructuring and some of them are those affected by the massive flooding in 2011.
“Besides waiving principal payments and cutting the interest rate to help customers, we have to help them through new loans.
“The Thai Credit Guarantee Corporation can help the bank to make the decision to lend to SMEs more easily but some customers have no way to survive. They will end up having to give up their business,” Suvarn said.
The only hope for the economy is government spending, the bank believes. It anticipates that the government will come out with more measures to enhance the economy and speed up investment.
BBL recently told an analysts meeting that loan loss provisioning was set at Bt12 billion this year, lower than Bt14.6 billion last year.
Tisco Securities said in a research note that the high provisioning of several banks would pressure the profit growth of this industry in the first quarter. The brokerage predicts first-quarter net profits of the banking industry to decline 8 per cent year on year to Bt47 billion.
A pick-up in loan demand and improvements of assets are expected to be seen in the second half of this year, which is when the government will implement its infrastructure projects.
Chartsiri Sophonpanich, president of the bank, said at the shareholders’ meeting on April 12 that the trend of NPLs was up, amid the economic slowdown. However, that doesn’t worry the bank much, as it has provisioned to cope with the rising bad loans.
For the case of Thai TV, the bank has set full reserves against this customer after it failed to pay its fees to the regulator, resulting in the regulator cashing in the bank guarantee from Bangkok Bank.
Chartsiri told shareholders that other digital-TV operators did not have problems, but the bank was keeping its eye on the remaining digital-TV customers.
