Mr. Jaturong Jantarangs, Senior Director, Financial Institutions Policy Group, reported the Thai banking system’s performance in the first quarter of 2015 to remain resilient, with slower loan growth and slight deterioration of loan quality in line with slower-than-expected economic recovery. Nevertheless, the banking system maintained high level of provision and capital, with continued profit. Details are as follows.
The slower-than-expected economic recovery coupled with decelerated demand for corporate credit as a result of the economic slowdown led to slower loan growth at 4.3%, compared with 5.0% in the previous quarter. Corporate loan (68.7% of total loan) continued to expand at a decelerated rate of 2.9%. The slowdown was attributed mainly to commerce sector, whereas public utilities sector especially power plants, logistics and warehouses exhibited high loan growth. Loan to large corporate grew at 1.0%, down from 4.6% last quarter as large corporate turned to raising fund through financial instruments instead of bank loan. SME loan started to pick up and grew faster at 4.5%, after continued slowdown since the beginning of 2014. Consumer loan (31.3% of total loan) growth at 7.6% was relatively stable from last quarter, with expansion in personal loan and housing loan in contrast with continued contraction of car loan at 4.0%, compared to the same period last year.
Overall loan quality deteriorated from SME loan and consumer loan. Non-Performing Loan (NPL) recorded at 298.3 billion baht, increasing by 21.1 billion baht from last quarter (compared with 13.0 trillion baht of total loan). Gross NPL to total loan ratio increased to 2.29% from 2.15% in the previous quarter. NPL ratio of large corporate was stable, while that of small SME and consumer loan increased, mainly from housing loan and collateralized personal loan. Special mention loan (SM : loan overdue above 1 month but not more than 3 months) increased from various loan types to 366.2 billion baht, bringing SM to total loan ratio up from 2.61% to 2.81%. However, banks have closely monitored and managed their loan portfolio, and the ratio of actual to regulatory loan loss provision remained high at 165.9%. The banking system had net profit of 52.5 billion baht in the first quarter of 2015, close to the level in the same period of last year, with increased profit from valuation of financial instruments and sale of debt securities, as well as a decline in operating expenses. Capital fund of the banking system recorded at 2,025.1 billion baht, declining by 18.1 billion baht from last year as a result of redemption and gradual deduction of Tier-2 instruments not eligible under Basel III capital requirements. Thus, capital adequacy ratio (BIS ratio) decreased slightly to 16.6%, while Tier-1 ratio was stable at 13.7%.