Mr. Tharith Panpiemras, Senior Director, Banking Supervision and Risk Assessment Department, Bank of Thailand, reported on the Thai banking system’s performance in the third quarter of 2019 thatthe Thai banking system remained resilient with higher levels of capital fund and loan loss provision to withstand a potential adverse impact from economic uncertainty. Meanwhile banking system’s performance improved. Details are as follows:
Capital fund of the Thai banking system was at 2,738 billion baht, increased from profit appropriation and issuance of subordinated bonds, resulting in higher capital adequacy ratio (BIS ratio) at 19.2%. Loan loss provision increased by 9.9 billion baht from previous quarter to 690.5 billion baht with higher ratio of actual to regulatory loan loss provision at 196.3% to withstand economic uncertainty. Liquidity coverage ratio (LCR) remained high at 185.0%.
The continued economic slowdownadversely impacted bank loan growth and asset quality, particularly small and medium-sized enterprises. As a consequence, bank loan growth continued todecline from 4.2% last quarter to 3.8% year-on-year. Details of bank loan growth are as follows:
Corporate loan (64.7% of total loans) grew at 1.3% year-on-year. Large corporate loan growth (excluding financial business) slightly increased from 2.2% last quarter to 2.6% year-on-year despite loan repayments by some large corporates that raised funds through the bond market. SME loan (excluding financial business) contracted 1.0% from 0.1% year-on-year growth last quarter, following a decline in bank lending to both small and medium-sized enterprises.
Consumer loan (35.3% of total loans) continued to grow robustly despite a decline in the growth rate from 9.2% last quarter to 8.7%. This was largely due to two consecutive quarters of 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. However, personal loan and credit card loan continued to grow at higher pace.
On the loan quality front, the ratio ofgross non-performing loans(NPLs) to total loans increased from 2.95% last quarter to 3.01%. Gross NPL outstanding stood at 469.5 billion baht, increasing by 19 billion baht from last quarter, mainly attributed to an increase in NPL of a large corporate in real estate business and the deterioration in asset quality of SMEs. Meanwhile, the NPL amount outstanding of mortgage and auto loans continued to increase. However, the ratio of special mention loans (SMs) to total loans declined from 2.74% last quarter to 2.59% as a result of one large corporate being reclassified as NPL.
In the third quarter of 2019, the banking system recorded net profit of 96.5 billion baht, increasing from the same period last year. This was mainly driven by an extraordinary item from gains on sale of investment by a large Thai bank. As a result, nine-month net profit rose to 214.4 billion baht. Excluding this extraordinary item, a third-quarter net profit still increased compared to the same period last year, which was attributed to an increase in net interest income as a result of retail loan portfolio expansion, higher dividend income and fee income from securities brokerage and bancassurance. Meanwhile, higher provisioning expenses were set aside as a buffer against deteriorating asset quality as well as economic uncertainty. Overall, the return on asset (ROA) increased from 1.26% last quarter to 1.98%, while the ratio of net interest income to average interest-earning assets (Net Interest Margin: NIM) remained stable at 2.74%.
Bank of Thailand
November 18, 2019
For further information, please contact: Banking Risk Assessment Division
Tel: +66 2283 5980
 In the third quarter of 2019, ROA after adjusting for an extraordinary item from gains on sale of investment would decline to 1.11%.