Bad debt rises to 3.09% but banks remain resilient, says BOT
Non-performing loans (NPLs) rose to 3.09 per cent of total lending in the second quarter, up slightly from 3.04 per cent in the first quarter, to a total Bt509 billion, the Bank of Thailand (BOT) said on Monday (August 17).
The rise stemmed mostly from the deteriorating performance of big businesses, according to Tharith Panpiemras, senior director at the central bank’s Banking Supervision and Risk Assessment Department.
Bank lending to large businesses increased in the second quarter. However, significant increase in credit risk (SICR) dropped to 7.48 per cent, from 7.69 per cent in previous quarter.
Combined bank profits were worth Bt31 billion, down from Bt53.3 billion in the first quarter. The sharp drop in profits was caused by a rise in reserve coverage against risk assets, resulting from the Covid-19 fallout.
This saw return on assets (ROA) fall to 0.57 per cent from 1.03 per cent in the first quarter. Meanwhile the interest rate margin dropped to 2.6 per cent from 2.9 per cent, due to falling interest revenue. Commercial banks cut lending rates in line with the central bank’s low interest rate policy, noted Tharith.
Despite the poorer performance, banks’ combined capital remains solid at Bt2.9 trillion, with a capital adequacy ratio of 19.2 per cent. Total banks’ reserves also remain high at Bt743.7 billion, with an NPL coverage ratio of 144.1 per cent. Banks had ample of liquidity, with liquidity coverage ratio at 183.4 per cent.This will enable banks to continue supporting the economy via lending, debt restructuring and other financial relief measures for borrowers, he said.
Total bank lending in the second quarter rose 5 per cent year on year, compared to a 4.1 per cent rise in the first quarter.
Business loans grew 5.1 per cent to account for 65.2 per cent of all lending, supported by government policy and lending to support small businesses via the central bank’s soft loan scheme. Lending for consumption representing 34.8 per cent, up 4.8 per cent but decelerating from the previous quarter, while mortgage lending also increased in line with rising demand for homeownership, according to the central bank.
Economists earlier projected that bad debt might be much larger than official figures, since nobody knew exactly the state of asset quality due debt moratoriums for both corporate and individual bank borrowers.
