The outlook for small and medium-sized enterprise (SME) loans remains grim, in line with the struggling economy, says Kasikornbank (KBank).
The bank, the SME market leader with a loan portfolio of 554 billion baht, said domestic consumption had been deteriorating for many years and it was highly likely to remain tepid throughout this year.
Executive vice-president Patchara Samalapa said the bank's SME lending expanded by 4% year-to-date, slightly higher than GDP growth this year.
In the second half of the year the situation might not be worse than the first half, but it is unsure that there will be significant improvement.
Despite growth being higher than GDP, Mr Patchara said the reason behind the expansion was clients using their existing trading credit rather than requests for new loans.
"Currently, if we look at net new SME lending, SME loans contracted by 6% from the same period last year," said Mr Patchara.
"This is mainly because there has been no growth in new investment as the domestic market has contracted," he added. "The overdraft [O/D] loan utilisation rate increased to 58% of total credit. The size of O/D loans contributed around two-thirds of SME outstanding loans."
At the end of June, SME outstanding loans stood at 554 billion baht, up from 550 billion baht at the end of last year. The borrowing amount per customer was 10 million baht on average.
Amid the faltering economy, the amount of bad loans continues to rise. SME non-performing loans in the first half of the year stood at 2.92%, rising from 2.48% at the end of 2014. Also, 70,000-80,000 customers are in the process of renegotiating debts.
Mr Patchara said many SME customers showed signs of struggling with their debt repayment since early last year. They have received the bank's assistance on borrowing terms, but their ability to earn revenue has not improved.