Corporate loans are expected to be the key contributor to lending growth in the banking sector in 2023 thanks to improving demand from businesses and the strong financial condition of large companies.
Kasikorn Research Center (K-Research) forecasts total banking sector loan growth for 2023 to be around 4.7%, a dip from the 2022 projection of 5%, on the back of the country's uneven economic recovery, swelling household debt, and 2023's expected global economic slowdown.
The total loan growth of the banking industry in 2023 will be mainly fuelled by commercial lending, especially large corporate customers, whose financial status remains strong. Therefore, the research house projects 4% growth in 2023 commercial loans, up from an estimated 2% in 2022. Retail loan growth is expected to be at 4.2% in 2023, the same as the projected 2022 growth rate.
The non-performing loan (NPL) ratio of the banking sector is expected to be steady in 2023 in the range of 2.65% to 2.75%, compared to 2022's forecast of 2.55% to 2.8%. The NPL situation is not expected to improve in 2023 due to the uneven recovery of the Thai economy, high levels of household debt, and external uncertainties, said K-Research.
Payong Srivanich, chairman of the Thai Bankers' Association and president at Krungthai Bank (KTB), said the Thai economy has shown clear signs of recovery, mainly supported by the tourism sector amid a projected worldwide economic slowdown and several global uncertainties. He said private investment would show positive signs in 2023, in line with the country's economic rebound.
These positive scenarios would support loan demand, especially corporate loans, as local large companies remain strong both in their potential for business expansion and their financial condition.
The Bank of Thailand's transition loans, which expanded from an earlier soft loan scheme, and government loans are the key areas which will facilitate KTB's loan growth in 2023, Mr Payong said.
"For 2023 loan growth, KTB will pay more attention to the technology development sector and environmental, social and corporate governance financial facilities," said Mr Payong.
He said KTB will look after vulnerable clients through a long-term debt restructuring programme by offering financial assistance on a case-by-case basis.
According to the central bank's data, the commercial banking sector recorded commercial loan growth of 6.1% in the third quarter of 2022, compared with consumer loan growth of 3.9%. The NPL ratio of commercial loans dropped to 2.83% in the third quarter from 2.96% in the second quarter. The bad debt ratio of large companies with credit lines of more than 500 million baht declined to 1.88% in the third quarter, from 2.09% in the previous quarter.