Mr. Tharith Panpiemras, Senior Director, Banking Supervision and Risk Assessment Department, Bank of Thailand, reported on the Thai banking system’s performance in the second quarter of 2019 that the Thai banking system remained resilient with high levels of capital fund and loan loss provision to withstand a potential adverse impact from economic slowdown. Meanwhile banking system’s performance improved. Details are as follows:
Capital fund of the Thai banking system was at 2,637 billion baht increased from profit appropriation and issuance of subordinated bonds, resulting in a slight increase in capital adequacy ratio (BIS ratio) to 18.5%. Loan loss provision remained high at 680.6 billion baht with the ratio of actual to regulatory loan loss provision slightly increased to 195.6%. Liquidity coverage ratio (LCR) remained high at 180.0%.
Bank loan growth declined from 5.6% last quarter to 4.2% year-on-year consistent with a slowdown in economic growth. Details of bank loan growth are as follows:
Corporate loan (65.1% of total loans) grew at 1.7% year-on-year. Large corporate loan growth (excluding financial business) expanded at a slower pace from 4.4% last quarter to 2.6% year-on-year due to some loan repayments in manufacturing, commerce and service businesses. However, loans continued to expand well in public utilities and real estate businesses. SME loan growth (excluding financial business) contracted 0.1% from 1.5% year-on-year growth rate last quarter in line with economic conditions, coupled with loan repayments by large SMEs that raised funds through the bond market
Consumer loan (34.9% of total loans) expanded at a slightly slower rate at 9.2% from 10.1% last quarter, due mainly to slower growth in mortgage lending following a period of accelerated growth prior to the implementation of Loan to Value (LTV) measure, as well as a slower growth in auto loan consistent with a slowdown in domestic car sales. Meanwhile, credit card and personal loans continued to expand well, partly attributed to high competition in retail loan market among financial institutions.
On the loan quality front, the ratio of gross non-performing loans (NPLs) to total loan remained stable at 2.95%. Gross NPLs outstanding stood at 450.6 billion baht, decreasing by 3.3 billion baht from last quarter, partly due to write-off and trouble-debt restructuring. The ratio of special mention loans (SMs) to total loans increased from 2.56% last quarter to 2.74% as a result of slower economic growth.
In the second quarter of 2019, the banking system recorded net profit of 60.8 billion baht, increasing from the same period last year, mainly as a result of higher dividend income from subsidiaries and lower provisioning expenses. Nonetheless, fee income slightly increased from previous quarter due to bancassurance, securities brokerage, and fund transfer fees. Overall, the return on asset (ROA) increased from 1.20% last quarter to 1.26%, while the ratio of net interest income to average interest-earning assets (Net Interest Margin: NIM) declined from 2.82%* last quarter to 2.75%. In the first quarter of 2019, banking system recorded extraordinary income and expenses as follows (1) realized interest income of NPL customer from collateral sale, (2 ) gain on sales of investment, and (3 ) expenses due to provision for employee benefits under Thailand’s new Labour Protection Act. If deducted special items, ROA and NIM registered at 1.13% and 2.74%, respectively.
Bank of Thailand
August 9, 2019
For further information, please contact: Banking Risk Assessment Division
Tel: +66 2283 5980
E-mail: BRAD@bot.or.th
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* In the first quarter of 2019, banking system recorded extraordinary income and expenses as follows (1) realized interest income of NPL customer from collateral sale, (2 ) gain on sales of investment, and (3 ) expenses due to provision for employee benefits under Thailand’s new Labour Protection Act. If deducted special items, ROA and NIM registered at 1.13% and 2.74%, respectively.
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