First-half loan loss provisions sufficient to handle rise in NPLs in second half, central bank says
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LOAN-LOSS reserves put in place by the banking sector in the first half of the year are sufficient to cope with a rise in non-performing loans (NPLs) in the second half, Tongurai Limpiti, Bank of Thailand deputy governor for financial institutions’ stabil
The banking sector reported an overall 4.9-per-cent drop in net earnings for the first half after some banks set aside higher allowances for loan losses to tackle the uncertainties arising from the economic slowdown.
Although the high reserves might have had an impact on the banks’ bottom lines, in the view of the BOT, the net profit of above Bt100 billion reported by the banking sector was an acceptable figure, Tongurai said.
The central bank was not worried about the majority of the NPLs in the banking sector as they were from existing customers. However, bad loans in the SME (small and medium-sized enterprises) sector could pose a problem, she said.
Kiatnakin Bank reported the highest NPL rate among its peers in the first half at 6.1 per cent, mainly from small and medium-sized property developers. However, the bank’s loan-loss provisions dropped to Bt1.2 billion from Bt1.44 billion, allowing net profit to surge by 70 per cent over the same six months of 2015 to Bt2.40 billion.
Kasikornbank, the biggest lender in the SME sector, also witnessed rising NPLs in the second quarter from SME customers, as its gross NPL rate reached 2.89 per cent, up from 2.81 per cent in the first quarter and from 2.7 per cent at the end of last year.
KBank set aside significant provisions for the first half at Bt19.57 billion against Bt9.74 billion in the same period last year, and its net profit for the first half of 2016 plunged by 20 per cent year-on-year to Bt19.07 billion.
However, KBank reported the highest loan growth among the top four banks, at 3.24 per cent.
Bangkok Bank reported loan growth of 2 per cent but its NPL rate rose to 3.11 per cent from 2.76 per cent last year. It set aside loan-loss reserves of Bt7.2 billion for the first half of this year, up from Bt5.9 billion a year earlier.
Despite rising NPLs, the high loan-loss-coverage ratio of 165 per cent is sufficiently resilient to cope with a possible increase in NPLs above its peers, as about 61 per cent of BBL’s lending is to corporate clients, a segment that will recover ahead of retail lending, according to Bualuang Securities.
Krungthai Bank also set aside higher reserves for the first half at Bt16.36 billion against Bt11.23 billion in the same period last year, while NPLs climbed to 3.89 per cent from 3.1 per cent last year. NPLs continued to increase from corporate and SMEs clients and the retail sector.
Banks specialising in hire purchase (lease to own) set aside lower loan-loss reserves in the first half 2016 compared with the same period last year, after a slowdown in used-car repossessions.
Tisco Financial Group, the holding company of Tisco Bank, reported a loan-loss reserve of Bt2.17 billion, down from Bt1.44 billion. Thanachart Bank reported a loan-loss reserve of Bt3.2 billion for the first half of this year, down from Bt5.19 billion in the same period last year.
Both Tisco and TBank reported an increase in net profit for the first half compared with the same period a year ago. Tisco netted Bt2.46 billion, up from Bt2.19 billion, while TBank’s net profit increased by 14 per cent to Bt6 billion.
