Overall bad loans are expected to rise at a slow pace this year due to improved economic prospects, while the recovery momentum will help annual loan growth expand by 7%, says a senior Bank of Thailand official.
Despite projecting non-performing loans (NPLs) to rise steadily in the first quarter due to the modest pace of economic recovery, full-year growth of bad loans is not expected to increase substantially given that improving growth impetus will offset a rise in NPLs, said Tongurai Limpiti, deputy governor for financial institutions stability.
Tongurai: Sees banks’ loan growth at 7%
"The economic pickup and spending will occur once the budget disbursement for the government’s infrastructure development projects is expedited," she said.
"Expansion of NPLs came from consumer loans rising to 2.65% [in the third quarter of 2014] from 2.2% [in 2013], but this was not unusual since consumer loans did not have a sufficient buffer to withstand the economic slowdown."
In 2014, overall gross NPLs rose to 2.34% in the third quarter from 2.28% in the second quarter, while net NPLs also increased to 1.18% from 1.1% due mainly to the deteriorating ability to service debt from consumer loans, in tandem with sluggish economic growth.
The rate of increase of third-quarter NPLs was 3.6% quarter-on-quarter to a value of 10.3 billion baht.
Mrs Tongurai said banks' loan growth was expected to reach 7% this year, up from last year’s 5% growth, due to the expected better economic environment.
Business loans for the construction, property and utility sectors are expected to post decent growth this year, she said.
In another development, she said the central bank was set to launch the first stage of regulations concerning capital adequacy ratio requirement for specialised financial institutions (SFIs) this quarter.
The central bank is expected to adopt the Basel II accord to supervise SFIs since that regulation is adequately strict, Mrs Tongurai added.