Two bad asset management companies reported lower net profits in the first quarter this year, attributed to higher expected credit losses (ECL) amid a fragile economic recovery.
Two of the three SET-listed asset management companies, JMT Network Services and Chayo Group, posted a year-on-year decline in net profit for the first quarter of 2024.
However, Bangkok Commercial Asset Management (BAM), the market leader, recorded an improvement over the same period.
JMT registered a net profit of 418 million baht for the first quarter, down 7.7% year-on-year. The decline was attributed to a significant increase in ECL to 114 million baht, up 65.5% year-on-year, as non-performing loan (NPL) collections did not meet expectations, according to the company's financial statement to the Stock Exchange of Thailand.
Thailand's household debt ratio is projected to rise to 91.4% of GDP this year. Credit cards, leasing and personal loans are experiencing the fastest growth in a decade.
JMT said this rise poses significant risks because of three factors: a slow economic and income recovery, higher financial costs compared with the past, and poor financial discipline in debt management.
According to the company's statement, the uptick in household debt is expected to lead to an increase in NPLs.
Financial institutions are expected to continue releasing NPLs, although there may be a slowdown in the first half of the year related to the Bank of Thailand's request for financial institutions to first enhance debt restructuring processes for debtors.
This request could result in a limited amount of debt sales, said JMT.
"The company has taken measures to monitor NPLs, including legal processes to ensure debt recovery within this fiscal year," JMT said in its statement.
Chayo reported a net profit of 42.5 million baht for the first quarter, a 64.1% decrease year-on-year, attributed to a one-time ECL increase.
In contrast, BAM's net profit for the first quarter was 423 million baht, up 58.7% year-on-year, according to the SET.
Krungsri Securities predicts bad debt sales by financial institutions will increase in the second half of the year, particularly for auto loans and unsecured loans, which include credit card and personal loans.
In the first half, banks have focused primarily on debt restructuring rather than bad debt sales, in compliance with the central bank's requirements.
Special mention (SM) loans, which are defined as debt overdue by 31-90 days, have continued to increase, according to figures from the National Credit Bureau (NCB).
NCB data indicates total SM loans reached 644 billion baht in the first quarter, up 7.3% year-on-year.
During this period, SM credit card loans surged by 32.4%, followed by a 15% increase in housing SM loans.
SM auto loans and personal loans increased by 7.1% and 5.9%, respectively.