Siam Commercial Bank (SCB) and Krungthai Bank (KTB) have allocated provisions for potential loan losses related to Italian-Thai Development Plc (ITD), aligning with the asset quality of one of the country's leading contractors.
SCB established provisions for potential loan losses concerning ITD at an appropriate level, based on a forward-looking expected credit loss (ECL) framework, said Arthid Nanthawithaya, chief executive of SCB X, a holding company of SCB, at a shareholder meeting last Friday.
The bank is not classifying the corporate customer as a non-performing loan (NPL), he said.
"Given our robust risk management, SCB is well-prepared to manage the loan quality of the customer in accordance with the situation. The customer is still categorised as a normal loan, so there is no need for additional provisions," said Mr Arthid.
He said SCB established a substantial loan loss reserve to prepare for heightened economic uncertainties and unforeseen circumstances. This existing reserve encompasses the credit risk associated with both individual and commercial loans.
SCB X is aiming for a credit cost range of 160-180 basis points for 2024.
The company's ECL increased to 43.6 billion baht, representing 182 basis points of total loans last year.
According to recent news reports, the country's major banks, including Bangkok Bank (BBL), KTB, Kasikornbank (KBank) and SCB, extended credit lines totalling 24 billion baht to ITD.
Of the total, BBL granted 8 billion baht, half of which is unsecured, while KTB provided 4 billion baht, with a similar split of secured and unsecured loans.
KBank and SCB each offered 6 billion baht to ITD, with the unsecured amounts totalling 3 and 1 billion baht, respectively.
In an analyst meeting, KTB president Payong Srivanich disclosed that the bank has allocated a 100% loan loss provision for ITD.
FSS International Investment Advisory Securities (FSSIA) reports KTB classifying ITD as a stage 2 loan and reserving 100% for potential losses.
FSSIA projects KTB's asset quality as manageable, with the bank's NPL ratio expected to hold steady at 3.85% in the first quarter of this year from the previous quarter.
KTB's credit cost is expected to be 132 basis points in the first quarter, slightly higher than the bank's guidance of 120-130 basis points throughout this year.
However, KTB aims to maintain its NPL coverage ratio steadily at 174% in the first quarter, similar to the previous quarter.
Regarding BBL, FSSIA said there are concerns about corporate loan issues in the first quarter, particularly involving ITD and its associated supply chain.
Nevertheless, these concerns are deemed manageable as there is a mutual agreement between creditor banks to inject additional liquidity, while BBL would force debtors to liquidate part of their valuable assets.
FSSIA predicts BBL's NPL ratio to increase to 3.26% in the first quarter of 2024, up from 2.7% in the previous quarter.
The bank is expected to set aside higher provisions and increase the NPL coverage ratio to 325% in the first quarter this year, up from 315% in the previous quarter, according to FSSIA.