The Thai banking system remains resilient with robust levels of capital, loan loss provisions, and liquidity. In the second quarter of 2025, loan growth in the banking system (licensed banks and their subsidiaries) contracted at a slower pace of -0.9% year-on-year. Large corporate loans continued to expand, while SME and consumer loans continued to contract due to heightened credit risks. The banking system's NPL¹ in the second quarter of 2025 increased slightly to 554.9 billion Baht, mainly driven by business loans, while NPL of consumer loans declined across all portfolios. As a result, the NPL ratio remained stable at 2.91%. Stage 2 loans² decreased across nearly all portfolios, primarily due to improved loan classification for borrowers who resumed repayment under debt restructuring conditions, resulting in a decline in the Stage 2 ratio to 6.88%. Nevertheless, commercial banks continued to provide assistance to borrowers and manage their loan portfolios. The banking system’s profitability improved from the previous quarter, mainly due to seasonal dividend income. However, provisioning expenses increased to buffer against potential uncertainties arising from global trade policy risks. Meanwhile, net interest income declined as a result of interest rate cuts, lower loan volumes, and the implementation of the ‘Khun Soo, Rao Chuay’ program, which provided interest rate reductions to borrowers.

Nonetheless, it is necessary to closely monitor the prevailing tight financial conditions and the debt serviceability of businesses and households, particularly among vulnerable groups with slow income recovery and high debt burdens. In addition, it is crucial to closely assess the potential impact of U.S. trade policies on the financial positions of businesses and households, as well as the effectiveness of assistance measures under the “Khun Soo, Rao Chuay” program. In the first quarter of 2025, the household debt to GDP ratio decreased from the previous quarter, largely due to a slowdown in household debt. Similarly, the corporate debt to GDP ratio also decreased, mainly due to economic expansion, while debt accumulation remained stable. Overall profitability declined compared with the same period last year. Although the manufacturing sector benefited from front-loaded export production, the tourism-related and other service sectors remained under pressure from lower foreign tourist arrivals and subdued housing market demand.

^{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)}