Banking sector NPLs edge up in Q1
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Banking sector NPLs edge up in Q1

Credit cards posted the largest gain

Leading banks exhibit at the Money Expo, held at Impact Muang Thong Thani on May 16, 2024. (Photo: Varuth Hirunyatheb)
Leading banks exhibit at the Money Expo, held at Impact Muang Thong Thani on May 16, 2024. (Photo: Varuth Hirunyatheb)

The Bank of Thailand reported higher non-performing loans (NPLs) for the banking industry in the first quarter this year, attributed to all types of loan products amid an uneven economic recovery.

NPLs in the banking sector reached 502 billion baht, or 2.74% of total outstanding loans in the first quarter, up from 2.66% in the previous quarter. This uptick in bad debt occurred for all types of loan products, said Suwannee Jatsadasak, assistant governor for the supervision group at the central bank.

During this period, the NPL ratio for corporate loans increased from 1.09% to 1.14%, while the NPL ratio for small and medium-sized enterprise (SME) loans rose from 6.72% to 6.88%.

The ratio of mortgage NPLs increased from 3.34% to 3.49%, while the rate of auto NPLs edged up from 2.13% to 2.14%. The NPL ratio for personal loans rose from 2.48% to 2.54%.

The NPL ratio for credit cards recorded the highest increase among all loan products, surging to 4.13% in the first quarter from 3.75% the previous quarter, according to central bank data.

Ms Suwannee said the uneven recovery of the Thai economy and household incomes negatively affected the asset quality of consumer loans.

The central bank's tighter regulations on credit card minimum payments partially contributed to the higher NPL ratio of credit card loans, she said.

Starting this year, the regulator raised the minimum payment rate for credit cards from 5% to 8%, with plans to increase it to normal level of 10% next year.

The central bank is monitoring the impact of the higher minimum payment on credit cardholders and found most people can service their debt appropriately.

In addition, the number of credit cardholders opting for minimum payment has been declining, said Ms Suwannee.

"We will maintain the minimum payment rate for credit cards at 8% this year, rising to 10% next year," she said.

"However, we will continue to monitor the situation, as vulnerable cardholders with lower income are the most affected."

The lower-income segment of credit cardholders is defined as earning between 15,000 and 20,000 baht per month.

Individuals with 2-5 credit cards are also categorised as a vulnerable segment.

For mortgages, homebuyers with a monthly income of less than 30,000 baht buying houses priced less than 3 million baht are considered the lower-income segment, according to the central bank's guidelines.

Despite the increase in NPLs, the household debt-to-GDP ratio in the first quarter this year is expected to decrease from 91.3% thanks to economic growth.

Ms Suwannee said the household debt ratio for the first quarter of 2024 would be announced in June this year.

On Monday, the National Economic and Social Development Council reported GDP growth for the first quarter was 1.5% year-on-year, surpassing the expectations of several research houses of a range of 0.6-0.8%.

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