SET-listed Bangkok Commercial Asset Management Plc (BAM) expects sales of non-performing loans (NPLs) to reach 100 billion baht by 2024, in line with rising distressed debts.
NPLs in the banking industry total roughly 500 billion baht, while special mention (SM) loans, defined as loans overdue from 30 to 90 days, total nearly 1 trillion baht, said the company.
Given the expiration of the Bank of Thailand's debt relief measures later this year as the economy revives, more SM loans could be classified as NPLs next year. As a result, NPL sales are expected to increase in 2024, said BAM chief executive Bundit Anantamongkol.
On average, the NPL ratio in the banking sector is 2.7% of the total loan portfolio.
The ratio of some banks exceed that level and these banks may need to preemptively manage bad debts by selling them to asset management companies (AMCs), said Mr Bundit.
According to the company's data, NPLs in the banking sector increased from 465 billion baht in 2019 to 523 billion in 2020 as the pandemic raged.
Bad debt remained steady at 531 billion baht in 2021, 499 billion in 2022 and 498 billion at present. Under normal circumstances with no debt assistance measures, NPLs could increase to around 600 billion baht, he said.
"With central bank relief measures due to expire later this year, NPL sales are expected to increase in 2024, perhaps reaching 100 billion baht, compared with an average of 70-80 billion baht per year," Mr Bundit said.
For the first half of 2023, total NPL sales in the banking industry tallied 130 billion baht, up from 70-80 billion in 2022, attributed partly to the expiration of the debt relief measures later this year.
Many investors see opportunities in non-performing assets (NPAs) purchasing and management, including BAM.
For the first half of 2023, the company recorded better than expected NPA sales of 3.37 billion baht.
BAM, the country's largest AMC with total bad assets under management of 250 billion baht, targets bad asset purchases worth 4.5 billion baht in the third quarter, comprising 2.5 billion baht worth of NPLs and 2 billion in NPAs.
The purchases are expected to rise in the fourth quarter to 5.4 billion baht, of which 3 billion would be NPLs and 2.4 billion from NPAs, he said.
Mr Bundit said the company is in the process of selling big lots of NPAs to large investors. The deals are expected to be completed within a few months, helping BAM to either meet or exceed its full-year target.
In addition, he said the company is in talks with a large local bank to set up a joint venture AMC. However, the partner will need to spend more time studying the new AMC model, and there is no time frame to establish the venture.