Local commercial banks' non-performing loans (NPLs) climbed to a nine-year high at 3.05% of loans outstanding at the end of March, with consumer bad loans outpacing commercial NPLs for the first time in four years.
Stage 2 loans, defined as those with credit risk that increased significantly, spiked to 7.7%, according to a senior official at the central bank.
The higher NPLs (Stage 3) and Stage 2 loans could be attributed to the sagging economy, affected by the Covid-19 pandemic and new Thai Financial Reporting Standards 9 implemented this year.
Commercial banks' loan quality deteriorated from the end of last year with NPLs amounting to 497 billion baht at the end of March, said Tharith Panpiemras, senior director of banking supervision and risk assessment management at the Bank of Thailand.
NPLs increased to 3.05% at the end of March from 2.98% at the end of last year, 2.94% at the end of 2018 and 2.91% in 2017.
Stage 2 loans jumped to 7.7% of loans outstanding at the end of March from 2.79% at the end of 2019, 2.42% at the end of 2018 and 2.55% in 2017.
The NPL outlook depends on the efficiency of banks in assisting virus-hit debtors, business operators' adaptation and the domestic and global economies, he said.
Operators in supply chains and manufacturers are expected to rebound swiftly after production volume picks up.
Consumer bad loans surged to 3.23% of total lending at the end of March from 2.90% at the end of 2019, 2.67% at the end of 2018 and 2.68% in 2017.
Non-performing commercial loans declined to 2.97% at the end of March from 3.01% at the end of last year, 3.05% at the end of 2018 and 3.01% at the end of 2017.
Even though the bad credit ratio of business loans fell, that of small and medium-sized enterprises (SMEs) increased to 4.81% at the end of March, from 4.63% at the end of last year, 4.56% at the end of 2018 and 4.51% in the preceding year.
Consumer loan quality deteriorated across product types. The bad mortgage ratio soared to 4.04% at the end of March from 3.71% at the end of last year, with Stage 2 loans jumping to 6.65% from 1.89%. The NPL ratio for auto loans rose to 2.09% at the end of March from 1.86% at the end of 2019, while Stage 2 loans shot up to 9.65% from 7.43%.
The NPL ratio of personal loans increased to 2.61% from 2.33% at the end of last year.
Commercial banks' loans at the end of March expanded 4.1% year-on-year, driven by commercial loans as some companies switched to financial institution lending from bond issuance amid the volatility in the debt instrument market, said Mr Tharith.
Commercial loans, which made up 64.8% of their total loans, grew 3.3% year-on-year at the end of March, compared with a 0.8% fall at the end of last year. Consumer loan growth slowed to 5.6% at the end of March from 7.5% at the end of 2019 due to lower demand for home, credit card and auto loans.