Thai Banking System Remains Resilient with Robust Capital, Liquidity, BOT Says

The Bank of Thailand said on Monday that the country’s banking system is still resilient thanks to high levels of capital, loan loss provision, and liquidity, all key drivers for bolstering the country’s economic recovery.

In 1Q23, loan growth in the banking sector slowed to 0.5% YoY due to government, major businesses, and soft credit facility loan payback and bank portfolio management. However, mortgage, consumer, and finance and trading corporate loans grew.

With continued loan portfolio management and assistance for debtors undergoing debt restructuring, the total amount of non-performing loans (NPLs) in Thailand fell to THB498 billion, or an NPL ratio of 2.68%.

Loan expansion and the interest rate hiking cycle offset fund expenses from rising deposit rates and FIDF fee normalization, BOT added. Net profit fell 4.0% QoQ due to increasing cost of capital and the high base effect from banks’ sale and transfer of consumer loans to subsidiaries.

The debt serviceability of highly leveraged households with poor income recovery, as well as the recovery of private sectors, should be continually tracked going forward. There was no change in the ratio of household debt to GDP, but the ratio of corporate debt to GDP continued to fall. 

Companies’ profits may have decreased, but their financial situations are still in good shape, according to the Bank of Thailand.