Bad loans on the rise as gloom hits banks
Non-performing loans (NPLs) in Thailand's banking system rose 2 per cent in the first quarter of this year, while credit grew only 0.22 per cent in the same period, reflecting the depth of the country's economic gloom.
About six banks have reported increasing bad assets, according to data released by the Bank of Thailand. Kiatnakin Bank says its NPLs are now 9.47 per cent of total loans, up from 3.29 per cent in the previous quarter. The others are Kasikornbank, Siam Commercial Bank, Bank of Ayudhya, BankThai and Standard Chartered (Thai).
However, Krung Thai Bank has the largest number of NPLs, accounting for Bt64.2 billion or 6.88 per cent of its total loans. Despite reporting an increase in NPLs in the first quarter, Standard Chartered (Thai) has the lowest number of bad loans, amounting to Bt677.7 million.
With Kiatnakin Bank leading other banks for the percentage of total loans that have gone bad, Thanachart Bank and Standard Chartered (Thai) have the lowest percentage of NPLs, amounting to 0.84 per cent of total loans.
In a research report, Capital Nomura Securities said the increasing NPLs indicate the dampened economy, as banks' net profits have contracted 22.36 per cent year on year to Bt20.2 billion.
The central bank's data excluded information from the Land and Houses Retail Bank.
The economic slow-down has also resulted in a jump in loans at some banks that have been classified in the "special mention" category.
For example, although Bangkok Bank's total loans and accrued interest changed by only 0.06 per cent in the first quarter, compared with previous quarter, its special mention class loans accelerated 55 per cent to Bt18.9 billion.
This indicates that these debtors have been losing their ability to repay their debts. If they fail to make repayments for three consecutive months, the bank must set aside a reserve provision.
Kasikornbank's loans in the special mention class were also up about 6 per cent, to Bt8.97 billion.
A research report released by Seamico Securities expressed concern about the quality of the banks' assets after last quarter's 2 per cent increase in NPLs, because the banks' bottom line was also 9 per cent lower than expected.
Brokerage houses reacted differently to the banks first quarter performance, but they were in agreement that credit growth will not recover in the second quarter.
Siam City Securities' head of research Sukit Udomsirikul said the banks' bottom lines were as he expected, particularly those of the big-sized banks whose year-on-year profits slowed down because of the Bank of Thailand's new accounting standard requirement.
"It is difficult to forecast net profits of some banks because of the reserve requirement, but the operating profits are close to our projection," he said.