Performance of the Thai Banking System in 2020

BOT Press Release No. 10/2021 | 22 Feb 2021 999 minutes read 55k

Summary
  • Thai banking system remained resilient with high levels of loan loss provision, capital fund, and liquidity to support economic recovery from the COVID-19 pandemic.
  • Banks continued to provide credit assistance to customers affected by COVID-19, which helped alleviate loan quality deterioration. Meanwhile, banks are encouraged to expedite proactive debt restructuring    

 

​Ms. Suwannee Jatsadasak, Senior Director, Bank of Thailand, reported on the Thai banking system’s performance in 2020 that the Thai banking system remained resilient with high levels of capital fund, loan loss provision and liquidity to support economic recovery from the COVID-19 pandemic.  Credit assistance measures, coupled 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 as banks continued to set aside loan loss provision at a high level as a cushion against a potential adverse impact of COVID-19 on loan quality.  Details are as follows:

 

 

Overall Performance of the Thai banking system in 2020

 

 

The Thai banking system's capital fund, loan loss provision and liquidity remained at high levels

 

 

Bank loan expanded as large corporates switched their funding source from corporate bond issuance to bank financing

 

Corporate loan (64.2% of total loan) expanded at 5.4% year-on-year, following a contraction of 0.8% in the previous year. This was mainly driven by an expansion in large corporate loan, where some large corporates switched their funding source from bond issuance to bank loan in the second quarter of 2020. Meanwhile, SME loan1  contracted at a lower rate, assisted by the soft loan scheme. 

           

Consumer loan (35.8% of total loan) grew at a slower pace at 4.6% year-on-year, compared to an expansion of 7.5% in the previous year, which was consistent with weak household purchasing power due to COVID-19.  However, consumer loan growth improved across all portfolios in the second half of 2020 following an improvement in economic activity after the relaxation of lockdown measures.  In particular, mortgage lending expanded in line with an increase in demand for low-rise residential properties and developers’ marketing campaigns.   

 

Bank loan expanded at a higher rate mainly from large corporates,SME loan contracted at a lower rate assisted by the soft loan scheme

 

 

Overall consumer loan grew at a slower pace in line with  weak household purchasing power during the COVID-19 outbreak

 

On the loan quality front, debtors affected by COVID-19 continued to receive credit assistance from banks.  As a result, the gross non-performing loan (NPL or stage 3) outstanding slightly increased to 523.3 billion baht, equivalent to NPL ratio of 3.12%.  Meanwhile, the ratio of loans with significant increase in credit risk (SICR or stage 2) to total loans stood at 6.62%.   

 

Overall NPL slighty increased. Meanwhile, debtors affected by COVID-19 continued to receive credit to assistance from commercial bank.

 

 

Asset quality deterioration was gradual in all consumer loan types, partly helped by debt restructuring

 

The banking system recorded net profit of 146.2 billion baht in 2020, a decline from the previous year.  This was attributed to a high level of provisioning expenses to cushion against a potential impact of COVID-19 on loan quality going forward, combined with a high base effect from the recognition of extraordinary items from gains on sales of investments in 2019.  As a result, the ratio of return on asset (ROA) declined from 1.39% in the previous year to 0.65%.  The ratio of net interest income to average interest-earning assets (Net Interest Margin: NIM) decreased from 2.73% to 2.51%.  

 

Net profit in 2020 declined as banks set aside a high level of provisioning expenses to cushion against a potential economic impact of COVID-19

 

 

Development in soft loan scheme and credit assistance from financial institutions

 

 

 

Contact for more information

Banking Risk Assessment Division

+66 2283 5980

BRAD@bot.or.th

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