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. In the first quarter of 2023, the banking system’s loan growth was 0.5% YoY^1/, slowed down from the previous year, primarily due to the loan repayment from government, large corporates, and soft loan facility, as well as banks’ portfolio management. The slowdown was partially attributed to large corporates raising funds through the bond market. However, banks’ loans continued to expand, particularly in large corporate loans in the financial and trading sectors, mortgage loans, and personal loans. On the loan quality front, banks continued to manage loan portfolios and support borrowers through debt restructuring, resulting in a decrease in gross non-performing loan (NPL or stage 3) balance to 498 billion baht, equivalent to the NPL ratio of 2.68%. The banking system’s profitability in the first quarter of 2023 improved from the previous year mainly from higher net interest income and gains from FVTPL of derivatives, despite the increased operational costs and provisioning expenses. The increase in net interest income was from loan expansion and the interest rate hike cycle, offsetting higher costs of funds from rising deposit rate and FIDF fee normalization. However, net profit declined by 4.0% QoQ, mainly due to higher cost of funds and the high base effect last quarter from extraordinary income arising from banks’ sale and transfer of consumer loans to subsidiaries, regardless of the lower provisioning expenses and operational costs.

However, there remains a need to closely monitor the debt serviceability of highly leveraged households with slow income recovery, and the recovery of certain businesses. The household debt to GDP ratio remained stable, while the corporate debt to GDP ratio continued to decline. Although corporate profitability softened, the overall financial positions remained favorable. As a result, it is essential to monitor the impact of weak global demand and rising costs on certain businesses. Nevertheless, financial institutions have continued to support their vulnerable debtors, particularly through debt restructuring in accordance with their serviceability prospects.

For further information, please contact: Banking Risk Assessment Division

Tel: +66 2283 5980, +66 2356 7796

E-mail: BRAD@bot.or.th

^1/ Excluding the impact of a banks’ transfer of credit card and personal loans to its subsidiaries, the total loan growth was 1.3% yoy.