Non-performing loans (NPLs) are not expected to worsen in the first quarter given improved economic growth prospects, but consumer loans could rise moderately, says a senior Bank of Thailand official.
"We have to concede that consumers need some time for their income to increase and make repayments [for their debt obligations], therefore there could be a rise in [NPLs of] consumer loans," said Jaturong Jantarangs, a senior director of the financial institution's strategy department.
But the pressure could be slightly eased by the declining trend in overall business NPLs, and the default rate in that segment is not high, while utility loans are expected to help drive better loan growth, he said.
Overall business NPLs shrank slightly to 193.7 billion baht in 2014 from 194 billion baht a year earlier.
Outstanding NPLs in 2014 stood at 277 billion baht, up by 11.5 billion baht from a year earlier, but gross NPLs remained at 2.15%, the same figure in 2013, while net NPLs rose slightly to 1.08% from 1% in 2013.
Consumer NPLs rose to 2.39% last year, up from 2.2% in 2013, on the back of an increase in bad loans for the automobile, credit card and personal loan segments.
Automobile NPLs rose to 2.5% from 2%, while NPLs in the credit card and personal loan segments increased by 3.2% and 2.5% from 2.6% and 2.3%, respectively.
Mr Jaturong said an accumulation of household debt prior to last year's economic slowdown caused consumer income to decline and it is considered as an additional factor adding to the rise in last year's consumer NPLs.
Outstanding special mention loans increased to 336.4 billion baht last year, up from 295.6 billion baht recorded in 2013, due mainly to loans provided to the manufacturing sector, rising to 5% from 4%.
The ratio of special mention loans to total loans increased by 2.6% in 2014, up from 2.4% in 2013.
Special mention loans are defined as 30 to 90 days overdue.
Last year's total loan growth was registered at 5%, down from 11% recorded in 2013, due to the impact of the political turmoil in the first half, contracted export growth and swelling household debt.
"Although the expansion of loan growth on an annual basis in last year's fourth quarter dropped, quarter-on-quarter loan growth accelerated with the highest growth rate of 2.9% in the fourth quarter," said Mr Jaturong.