BoT: Commercial bank NPLs to peak

BoT: Commercial bank NPLs to peak

Recovery expected in second half

Daranee: Business loan growth weak
Daranee: Business loan growth weak

Non-performing loans (NPL) held by Thai commercial banks are expected to peak in 2017 after an economic recovery began late last year, says the Bank of Thailand.

The gross NPL ratio at the end of March stood at 2.94%, up from 2.83% at the end of 2016.

"Assessed from our record in the past, NPLs are a laggard indicator that normally takes two or three quarters to recover after an economic recovery starts," said Daranee Saeju, senior director for the financial institutions strategy department at the Bank of Thailand.

She said the central bank's view on the NPL peak is in line with commercial banks' expectations.

The outstanding value of distressed loans was 405 billion baht at the end of March, up from 386 billion in the preceding three months.

Ms Daranee said distressed loans increased in every loan category in the first quarter this year from debtors affected by the economic doldrums.

Bad small and medium-sized enterprise (SME) loans climbed to 4.48% of loans outstanding at the end of March, up from 4.35% in the fourth quarter of 2016.

Business loans deteriorated in most segments, mainly from commerce and industrial sectors.

Bad consumer loans rose from 2.71% to 2.82% of loans outstanding as of March 31, largely because of the rise of housing NPLs that pressured banks to be careful in making new loans.

"Commercial banks' loan growth remained low in the first quarter of 2017, but is expected to improve in the second half," she said.

Outstanding bank loans expanded 2.8% year-on-year in the first three months this year, up from 2% in the fourth quarter of 2016, based on central bank data.

SME loans excluding the financial sector grew 2.2% in three months to March, a slight increase from 1.8% in the previous quarter, said Ms Daranee.

Growth in business loans sped up to 2% in the first quarter, up from 0.6% in the fourth quarter of 2016. The sharp increase was seen across the board, with the exception of the financial sector, she said.

Growth in consumer loans fell slightly to 4.6% in the first quarter, down from 4.9% the preceding quarter, slowing in most segments except auto loans.

Ms Daranee said the central bank expects banks' outstanding loans to record higher growth in the second half of 2017 supported by a stronger economic recovery.

"We expect to see growth of 4-6% in bank loans this year, up from 2% last year," she said.

In the first quarter commercial banks' net profit was 51 billion baht, up 0.4% year-on-year thanks to effective cost management. Loan-loss provisions set aside in the period stood at 35 billion baht, while the coverage ratio rose to 161.8% from 159.6% at the end of 2016.

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