TRIS maintains ‘stable’ outlook for Thai banking sector

Despite the sluggish Thai economy and a recent rise in non-performing loans, most Thai banks have been able to generate “considerably good results” and continue to strengthen their capital, the ratings firm said.
Overall loan growth for the whole industry is expected to continue its slow pace into the first half of next year. 
The persistent weak demand for loans in the corporate segment is likely to continue, whereas banks have slowed down their lending in the SME segment given the sharp rise in loan delinquency among small and medium-sized enterprises in recent years, TRIS said.
The deterioration in asset quality, particularly in the SME segment, has started to stabilise with most of the banks expected to report declining credit costs starting in the second half of this year.
The banks’ ability to largely maintain their net interest margins, notwithstanding the low interest-rate environment and their accumulated excess loan-loss reserves, has proved to be critical to weathering the recent deterioration in asset quality, and deflect any severe impact on profitability, the company added. 
Liquidity in the Thai banking system is expected to remain high, given the weak demand for loans and a strong base of system-wide funding from domestic depositors.