NPLs plunge on higher provisions

Reserves padded on robust profit growth

The banking industry enjoyed a significant reduction in non-performing loans (NPLs) last year thanks to much stronger results on the back of higher loan loss provisions.

NPLs totalled 109.95 billion baht, falling 11.28 billion baht or 9.3% from 121.23 billion baht in 2011.

In particular, Bangkok Bank (BBL), the country's largest bank, recorded NPLs of 10.22 billion baht last year, down by 31.86% from 2011.

As well, most local banks set significant additional loan loss reserves last year, mainly in the fourth quarter, in accordance with their strong profitability.

The overall banking system posted a 30% rise in net profit last year.

In particular, TMB Bank set a loan loss reserve of 8.75 billion baht throughout 2012, up by 182% from 3.1 billion in the previous year.

The Tisco Financial Group also set a provision of 1.95 billion baht last year, up by 51%.

Stronger loan loss provisions led to a higher loan loss coverage ratio of 118% on average as of Dec 31, higher than the Bank of Thailand's requirement of 100%.

BBL holds the industry's highest ratio of 207.1%, followed by Tisco at 165.3%.

The financial ratio of Krungthai Bank (KTB), however, is less than 100% compared with the higher level of the three largest banks _ BBL, Siam Commercial Bank (SCB) and Kasikornbank (KBank).

KTB's loan loss coverage ratio stands at 95.6%, below those of SCB and KBank at 153% and 136%, respectively.

Kittiya Todhanakasem, a first senior vice-president of KTB, said the bank's 95.6% loan loss coverage ratio is quite strong compared with the central bank's requirement.

Despite being at a lower level than the three other large banks, KTB's debt collateral is of good quality, she said.

Moreover, qualitative classification of NPLs would also support the bank's existing loan loss coverage ratio.

This year, KTB will set the provision at a normal 500 million baht per month.

However, it will set an additional reserve in the event of strong profitability similar to last year.

KTB set an additional provision of 9 billion baht in last year's fourth quarter.

Mrs Kittiya said the Bank of Thailand encourages banks to set a higher provision during boom times to guard against global economic uncertainty.

This saw most banks set additional reserves in last year's fourth quarter.

About the author

Writer: Somruedi Banchongduang
Position: Business Reporter