​The Thai banking system remains resilient with robust levels of capital, loan loss provision, and liquidity to serve as a key mechanism to support the economic recovery going forward. Banks’ loan growth in 2022 was 2.1% year-on-year, grew at a slower pace compared to the previous year. This was primarily due to the loan repayment from large corporates, government and soft loan facility together with a bank’s transfer of consumer loan business to its subsidiaries and the banks’ loan portfolio management. However, bank loans continued to expand mainly in large corporate loans in the trading sector, mortgage loans, and personal loans. On the loan quality front, banks continued to support their borrowers through debt restructuring and manage their loan portfolios, resulting in a decline in the gross non-performing loan (NPL or stage 3) balance to 499.2 billion baht, equivalent to the NPL ratio of 2.73%. Net profit of the banking system improved from the previous year, driven mainly by loan expansion and the interest rate hike cycle, which resulted in an increase in net interest income, combined with lower provisioning expenses after banks have gradually set aside an elevated level of provision throughout the COVID-19 period.

However, there remains a need to closely monitor the debt serviceability of households and the recovery of certain businesses. Despite a gradual reduction in Thai household debt to GDP following the economic recovery, households remain vulnerable from the elevated debt burdens, and their loan quality warrants monitoring, especially those vulnerable group that has not yet recovered from COVID-19 and may be affected by the gradual rising costs and interest rates. The corporate debt to GDP declined from the previous quarter, and the overall profitability remained favorable, but financial position of businesses which may be affected by rising costs should be monitored. Nevertheless, financial institutions have continued to support their debtors, particularly through debt restructuring in accordance with debtors’ serviceability prospects of the vulnerable groups.