Business loan demand remained weak in second quarter, BOT says
BUSINESSES drew down less on their credit lines in the second quarter of this year than in the first quarter, indicating that loan growth still faces a challenge even though the economy is expected to recover in the rest of the year.
“From the central bank’s internal data that it compiled, a factor that shows slower growth of lending is the trend of loan withdrawals from banks declining from the previous quarter,” Don Nakornthab, senior director of the Bank of Thailand’s Financial Institutions Policy Group, said yesterday
“That shows that loan demand is weak,” he said.
Loan growth in the banking system in the second quarter was 3.3 per cent, unchanged from the first quarter.
Lending to manufacturers dropped 4.8 per cent, accelerating from a decline of 2 per cent in the first quarter, while lending in the real-estate industry turned to falling 1 per cent from increasing 3.7 per cent.
Economic sentiment in the second half is expected to brighten thanks to government spending, tourism and the government’s additional measures to help small and medium-sized enterprises.
“But we have told banks to help monitor the ability of SMEs. If SMEs are unable to repay debt, the banks should offer help to these customers,” he said.
In the second quarter, the non-performing-loan ratio of SMEs in the banking industry climbed to 3.77 per cent from 3.69 per cent.
SMEs account for 38.6 per cent of total loans of the banking industry.
NPLs rose in all segments, not only among SMEs. Most are re-entry NPLs of business and consumer loans rather than new NPLs.
As of June 30, NPLs in the banking industry had reached Bt373.7 billion, up by Bt16.3 billion from the previous quarter, making the gross NPL ratio rise to 2.72 per cent from 2.64 per cent in the first quarter.
Gross NPLs will increase further and the NPL ratio should peak this quarter, so the banking industry still requires high loan-loss provisions, Don said.
In the second quarter, the coverage ratio improved to 161.3 per cent from 160 per cent in the first quarter.
Despite the high reserves, the profitability of the banking industry is healthy, he said.
The net interest margin stood at 2.6 per cent even though banks cut interest rates on loans to help business customers. This shows that banks can manage their cost of funds well, he said.
