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 2020 that the
Thaibanking system remained resilient with high levels of capital fund and loan loss provision to withstand economic and financial challenges going forward. Credit assistance measures, combined with revisions to rules on loan classification and provisioning supported bank loan expansion and alleviated the deterioration of bank loan quality. Meanwhile, banking system’s profitability declined due to higher provisioning expenses as a cushion against a potential adverse impact of COVID-19 outbreak on loan quality. Details are as follows:
Capital Fund of the Thai banking system was at 2,877 billion baht, equivalent to capital adequacy ratio (BIS ratio) of 19.2%. Loan loss provision remained high at 743.7 billion baht with NPL coverage ratio of 144.1%. Liquidity coverage ratio (LCR) registered at 183.4%.
Banks’ overall loan growth stood at 5.0% year-on-year, increasing from last quarter at 4.1%. Details on bank loan are as follows:
Corporate loan (65.2% of total loan) expanded at 5.1% year-on-year, mainly from loans to public sector and large corporates. With soft loan scheme to support liquidity for SMEs, SME loan[1] contracted at a lower rate.
Consumer loan (34.8% of total loan) grew at 4.8% year-on-year, with slower growth from the previous quarter in almost all portfolios consistent with economic contraction. However, mortgage lending expanded in line with an increase in demand for residential properties following the gradual relaxation of lockdown measures.
Banks’ loan quality remained stable as a result of pre-emptive relief measures that helped alleviate loan quality deterioration. The gross non-performing loan (NPL or stage 3) outstanding was at 509.0 billion baht, equivalent to 3.09% of total loan, a slight increase from 3.04% in the last quarter due mainly to a large corporate in the airline business.The ratio of loans with significant increase in credit risk (SICR or stage 2) to total loans stood at 7.48%, declining from 7.69% in the last quarter.
The banking system recorded lower net profit of 31.0 billion baht from 53.3 billion baht[2] in the last quarter due to an increase in provisioning expenses to cushion against loan quality deterioration together with lower core earnings, resulting in a decline in the ratio of return on asset (ROA) from 1.03% in the last quarter to 0.57%. The ratio of net interest income to average interest-earning assets (Net Interest Margin: NIM) compressed from 2.90% to 2.60%. This was attributed to a decline in interest income from lower loan rates following policy rate cuts and a reduction of FIDF (Financial Institution Development Fund) contribution to ease the loan interest burden for businesses and households.
Bank of Thailand
August 17, 2020
For further information, please contact : Banking Risk Assessment Division
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E-mail :
BRAD@bot.or.th
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[1] Corporates with a maximum credit line of 500 million baht with a bank.
[2] Excluding dividend payment between commercial banks which were in the process of consolidation.