- The Thai banking system remains resilient with robust levels of capital, loan loss provisions, and liquidity.
- The banking system’s profitability in the third quarter of 2024 improved from the previous year.
- Nonetheless, there remains a need to monitor the debt serviceability of SMEs and certain households with slower income recovery and elevated debt burden, as well as businesses affected by structural issues and declining competitiveness. These could cause a gradual increase in NPL but remain well-manageable with no immediate risk of an NPL cliff.
The Thai banking system remains resilient with robust levels of capital, loan loss provisions, and liquidity. In the third quarter of 2024, loan growth in the banking system (licensed banks and their subsidiaries) contracted by 2.0% year-on-year, primarily due to high levels of debt repayments, particularly from the government and large corporates. Despite continued new lending to large corporate in the service, real estate, and trade sectors, as well as consumers loans for personal and mortgage lending, the loans expanded at a slower pace. Meanwhile, loans to businesses facing competitiveness challenges continued to contract, especially in the petrochemical, electronic and automotive sectors.
The banking system’s gross non-performing loans (NPL or stage 3) in the third quarter of 2024 increased to 553.4 billion Baht, equivalent to the NPL ratio of 2.97%. This increase was partly attributed to a decline in loan base and higher NPLs from business and consumer loans.
Meanwhile, commercial banks continued to manage their loan portfolios and provide support to debtors. In addition, the ratio of loans with a significant increase in credit risk (SICR or stage 2) stood at 6.86%, increased from the previous quarter from business loans, mainly due to qualitative criteria in assets classification but debtors can still meet their contractual debt obligations, and mortgage loans.
The banking system’s profitability in the third quarter of 2024 improved from the previous year mainly driven by higher FVTPL profit while the net interest income declined. However, compared to the previous quarter, net profit declined primarily due to a reduction in seasonal dividend income, despite lower provisioning expenses.
Nonetheless, there remains a need to monitor the debt serviceability of SMEs and certain households with slower income recovery and elevated debt burden, as well as businesses affected by structural issues and declining competitiveness. These could cause a gradual increase in NPL but remain well-manageable with no immediate risk of an NPL cliff. The household debt to GDP ratio in the second quarter of 2024 slightly decreased from the previous quarter, reflecting a slowdown in credit expansion due to household debt deleveraging. Meanwhile, the corporate debt to GDP ratio decreased following a contraction in loans and debt securities. The overall corporate profitability remained favorable, particularly in the manufacturing sector.
