Government Savings Bank (GSB) plans to set aside capital reserves worth 12.4 billion baht to beef up its financial strength against rising bad loan prospects.
The bank has yet to assess the extent of potential distressed loans coming from its debt moratorium programme for loans worth 1.1 trillion baht, accounting for 50% of GSB's total loan portfolio worth 2.1 trillion, said president and chief executive Vitai Ratanakorn.
As the debt moratorium programme is scheduled to end on Dec 31, GSB has to set aside a high reserve portion to strengthen its financial position, said Mr Vitai.
GSB set aside capital reserves valued at around 200 million baht in 2019.
Such planned provision has not taken into account how state-owned financial institutions must comply with the new accounting standard that will take effect in 2022.
If there is no further deferment of the new accounting standard, GSB may have to set aside a high level of provisions because most of its borrowers are retail customers with no collateral assets, he said.
Such high capital reserves will cause the bank's profit to fall to around 18 billion baht this year, a decline from the usual annual profit of around 20 billion, said Mr Vitai.
Although the value of loans under the debt moratorium programme stands at 1.1 trillion baht, there are borrowers who still have good debt-servicing ability, with borrowers classified as civil servants making up a value of 400 billion baht, he said.
Another 400 billion baht is identified as housing and home decoration loans, for borrowers who have a good debt-servicing ability, said Mr Vitai.
The remaining 300 billion baht is classified as general loans, of which 60 billion is loans provided for small and medium-sized enterprises, he said.
For the outlook on new loan issuance in 2021, GSB assesses there is moderate demand for issuing new loans because some businesses have recovered, while others are still struggling to survive, said Mr Vitai.