Major Thai banks resilient to flood impacts
Major Thai banks' credit rating outlook remains stable despite the impact from the severe flooding and potential risk from a global economic slowdown, according to Fitch Ratings.
The banks are expected to remain resilient on the back of strong capital, improved reserve coverage and profitability.
Despite business and spending disruption which hit gross domestic product in the fourth quarter, Fitch said that there are risks over asset quality deterioration and provisioning but that should be alleviated by the Bank of Thailand’s forebearance on flood-affected borrowers by six to 12 months.
"Downside risks to Fitch's view could stem from a delayed recovery process. In a severe stress scenario, banks with lower reserves could be more impacted," it noted.
Strong loan growth without a parallel expansion of the deposit base has led to a steady rise in the loans-to-deposits ratio and, consequently, growing funding and liquidity risks. Increased global financial market volatility could exacerbate such risks for Thai banks, particularly small to medium-sized banks.
The rating agency noted that excessive issuance of bills of exchange and over-reliance on foreign-currency wholesale may also lead it to revise the outlook to negative.
