The Thai banking system remains resilient with robust levels of capital, loan loss provisions, and liquidity. In the fourth quarter of 2024, loan growth in the banking system (licensed banks and their subsidiaries) contracted by 0.4% year-on-year, an improvement from the 2.0% contraction in the previous quarter. This was driven by loan expansion among large corporates, while SMEs loans contracted at a slower pace. Consumer loans continued to decline, particularly auto loans, which were affected by structural issues and slow income recovery among vulnerable segments. The banking system's NPL^[1] in the fourth quarter of 2024 decreased to 532.1 billion Baht, reducing the NPL ratio to 2.78%. This decline was primarily attributed to business loans, partly driven by banks’ loan portfolio management, ongoing debt assistance, and the reclassification of certain NPL debtors who resumed repayments under debt restructuring obligations to stage 2 loans.^[2] In addition, qualitative criteria in asset classification of business loans contributed to an increase in stage 2 loans, which rose to 6.98%. The banking system’s profitability in 2024 improved from the previous year, mainly driven by higher non-interest income (mainly from FVTPL) and net interest income, coupled with lower provisioning expenses following elevated provisioning in the previous year.

Nonetheless, there remains a need to monitor the debt serviceability of SMEs and certain households facing slower income recovery and high debt burdens, businesses affected by structural issues and declining competitiveness, as well as the effectiveness of the assistance measures under the "Khun Soo, Rao Chuay" program. The household debt to GDP ratio in the third quarter of 2024 decreased from the previous quarter, driven by a slowdown in household debt. Meanwhile, the corporate debt to GDP ratio decreased due to contractions in loans and debt securities. Overall corporate profitability decreased from the previous year, particularly in the manufacturing sector, despite positive contributions from the tourism sector.

^{[1] Gross non-performing loans (NPL or stage 3)
[2] The ratio of loans with a significant increase in credit risk (SICR or stage 2)}