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Bad debt situation in control despite Covid-19 disruption, say bankers

Bankers are optimistic that rising bad debts driven by Covid-19 are manageable, though the second phase of the moratorium offered by many banks will end next month.

They estimate non-performing loans (NPLs) to rise to 5 per cent by the end of this year, up from 3 per cent at the end of last year.
Siridej Aungudomsin, senior executive vice president at Bangkok Bank (BBL), said on Friday that though bad debt was on a rising trend, there would be no repeat of the situation during the 1997 Asian financial crisis when it skyrocketed to 40 per cent. NPLs were expected to stay at around 3 to 5 per cent currently, he said.
About 70 per cent of small and medium-sized enterprises (SMEs) clients of BBL have not requested an extension of the debt moratorium after the first phase of assistance implemented in March came to an end, he said.
The impact of the Covid-19 outbreak has been severe, but Thai banks are resilient due to their strong capital base and ample liquidity, he said. 
BBL is still offering customers debt restructuring in order to help them survive the pandemic crisis, he added.
Surat Leelataviwat, executive vice present at Kasikornbank, revealed that as of June 30, all commercial banks assisted a large number of customers whose combined loans amounted to Bt4.5 trillion, representing 31 per cent of total loans of Bt14 trillion.
SMEs were the most affected group and 23 per cent of their total Bt4 trillion debt was restructured and 26 per cent were allowed a moratorium.
Of the SMEs, 100,000 are customers of Kasikornbank. The bank conducted a survey and found that 80 per cent of them do not need extra financial support. Only 400 firms closed their businesses. “It is quite surprising that the situation is not as serious as previously estimated,” he said.
Rak Vorrakitpokatorn, president of Thai Credit Guarantee Corporation, said that NPLs among SMEs were 6 to 6.5 per cent in the second quarter, up from 5.6 per cent of the total Bt6 trillion loans at the end of last year.
Some have forecast significant NPLs concealed in the debt moratorium and if there were no debt aid, the NPLs could spike to 20 to 30 per cent of total loans, he said.  He was also optimistic that bad debts would be manageable.
Niyot Masavisut, president of Sukhumvit Asset Management Co, said that about 100 clients had requested debt moratorium and 40 per cent of them could continue their businesses, while the remaining 60 per cent have requested extra assistance, he said.
He predicted NPLs to rise in the next two years, while banks and over 60 asset management companies would work together to tackle the bad debt. NPLs would rise to 5 per cent this year, up from 3 per cent last year, he added.

Published : September 27, 2020

By : The Nation