Commercial banks are being more cautious in granting loans to small and medium-sized enterprises (SMEs), while housing loans have slowed down due to rising interest rates and rising living costs, said Atchana Lamsam, the Bank of Thailand's senior director of modelling in the supervision and risk assessment department, in a statement providing an overview of commercial banks in the thrird quarter of 2023.
She said SME loans and corporate loans contracted by 2.1% as a result of increasing debt repayments to commercial banks when compared to the levels recorded before the pandemic.
Apart from debt repayment, the contraction in SME loans was also a result of more prudent lending to SMEs by commercial banks, with an average credit line of 300,000 baht per person.
Corporate loans are still gaining momentum, mainly in the financial, energy, and construction sectors.
Overall, consumer loans have also decelerated.
In terms of car loans, there has been an expansion of 0.8% as commercial banks are being more careful in granting this type of loan because the quality of loans in this segment has tended to deteriorate.
Housing loans expanded by only 2.4% in line with the higher cost of borrowing and the higher cost of living. These factors affected the home purchasing decisions of middle- and low-income earners.
In terms of the quality of debt in the commercial banking system, overall NPLs increased to 2.7%, a slight rise from the 2.67% recorded in the previous quarter.
NPLs in the consumer loan segment increased in all portfolio types - both credit card loans and personal loans.
The Bank of Thailand is concerned with the debt repayment ability of households, which is still fragile due to the slow recovery of income.
In the second quarter of this year, the country's household debt ratio reached 90.7% of GDP.
In terms of the stability of financial institutions, the central bank has reported an increase in capital funds and reserves of commercial banks, resulting from the allocation of profits from operating results from the second quarter to banks' capital funds.
In addition, there is a commercial bank which issues debt instruments that are counted as capital funds, resulting in the Bank for International Settlements ratio of the commercial bank to increase to 19.9%.
Liquidity coverage ratio, or the amount of liquid assets to fund cash outflows, increased to 196%.
"The NPL coverage ratio of the overall banking sector remains stable as commercial banks have continuously accumulated high levels of reserves," Ms Atchana said.
Ms Atchana added that there has been continued growth for debt instruments in the third quarter of up to 8% amid the slowdown from the previous quarter. This is a result of the issuance of corporate bonds in the past to contain financial costs during an uptrend in interest rates.
Most of the debt instruments are in the public utilities and service sectors.