No. 53/2018 Performance of the Thai Banking System in the Second Quarter of 2018 Ms. Daranee Saeju, Senior Director, Financial Institutions Strategy

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1 No. 53/218 Performance of the Thai Banking System in the Second Quarter of 218 Ms. Daranee Saeju, Senior Director, Financial Institutions Strategy Department, Bank of Thailand, reported on the Thai banking system s performance in the second quarter of 218 that bank loans continued to expand and overall asset quality stabilized in line with improvement in economic conditions. As a result, net profit increased due to lower provisioning expenses and higher interest income. The Thai banking system remained resilient with high level of loan loss provision, capital fund, and liquidity to facilitate further credit expansion. Details are as follows. Bank loan expanded from 4.7% last quarter to 5.4% year-on-year, with the expansion of corporate loan in several businesses, particularly from those SMEs with large credit line. Consumer loan expanded across all portfolios, driven by continued acceleration in auto loan. The overall financing through bank loans and debt securities combined, increased from 5.1% to 5.6%. Corporate loan (66.7% of total loans) grew at 4.1% year-on-year in several businesses, especially from those SMEs with large credit line. Although the loan growth to SMEs with small credit line improved, it remained concentrated in Bangkok metropolitan region. SME loan growth (excluding financial business) expanded at 7.5% in several sectors such as power plants, commercial properties for sale, and wholesale businesses. Large corporate loan (excluding financial business) contracted by 1.8% due to alternative financing through debt securities and equity, along with some loan repayments. Nonetheless, some large corporates, such as in accommodation and chemical manufacturing industries, continued to utilize more loans. Consumer loan (33.3% of total loans) expanded at 8.% year-on-year, driven by auto loan growth which has accelerated for five consecutive quarters to 12.4%. This was consistent with improved car sales after the five-year lock-in period of the first-car buyer

2 -2- scheme ended. Housing loan, credit card, and personal loans also expanded at 6.2%, 6.5%, and 8.%, respectively, which were in line with an increase in private consumption. On the loan quality front, the ratio of gross non-performing loans (NPLs) to total loan was at 2.93%, comparable with 2.92% of previous quarter. Gross NPLs outstanding declined from last quarter by 1.65 billion baht to 441 billion baht, partly as a result of debt restructuring and write-off. Special mention loans (SMs: loans overdue above 1 month but not more than 3 months) to total loan ratio increased to 2.36% from 2.32% last quarter, with SM outstanding of 356 billion baht. However, banks continued to build up provisions to enhance the system resilience, resulting in total provision of 637 billion baht, increased by 14.6 billion baht from last quarter, and the ratio of actual to regulatory loan loss provision of 182.1%. In the second quarter of 218, the banking system recorded increased net profit, compared to the same period last year. This was mainly attributed to lower provisioning expenses and higher interest income from loan expansion, although fee income has been affected by fee-free retail fund transfer via internet and mobile banking transactions. As a result, return on asset (ROA) increased to 1.21% from 1.7% last quarter and the ratio of net interest income to average interest-earning assets (Net Interest Margin: NIM) rose from 2.66% to 2.71%. Capital fund of the banking system stood at 2,477 billion baht, increased by 35.5 billion baht from last quarter. Meanwhile, risk-weighted assets increased due to more loan expansion, resulting in a slight decline in capital adequacy ratio (BIS ratio) and common equity Tier-1 ratio (CET1 ratio) to 17.9% and 15.3%, respectively. Bank of Thailand August 14, 218 For further information, please contact: Financial Performance and Loan Analysis Team Tel: FP&LATeam@bot.or.th

3 Performance of the Thai Banking System in the Second Quarter of 218

4 Overall Performance of the Thai Banking System in the Second Quarter of 218 Bank loan growth continued to increase. Loan expanded at 5.4%yoy, with loan expansion in several businesses, particularly from SMEs with large credit line. Consumer loans expanded across all portfolios, particularly from auto loan growth. The overall NPL ratio has stabilized. The overall NPL ratio was at 2.93%, close to 2.92% last quarter, partly due to debt restructuring and write-off. Banks net profit increased. Net profit increased due to lower provisioning expenses and higher interest income. Loan loss provision and capital fund remained high. Ratio of actual to regulatory loan loss provision remained high at 182.1%. BIS ratio and Common Equity Tier 1 ratio were at 17.9% and 15.3%, respectively. 2/12

5 Overall financing through bank loan and debt securities increased in line with economic growth. GDP and Loan Growth %yoy Real GDP Total Loan Bond* Total Loan and Bond* *Debt securities issued by private sector (excluding financial institutions). Source: Bank of Thailand and ThaiBMA 3/12

Bank loan continued to expand in almost all portfolios. Bank loans continued to grow. Loans to large corporate contracted by 1.

Loans to SME continued to increase, mainly from SMEs with large credit line.

Consumer loans expanded across all portfolios, driven by continued acceleration in auto loan. 1 5-5 1.7 1.

6 Bank loan continued to expand in almost all portfolios. Bank loans continued to grow. Loans to large corporate contracted by 1.8% due to alternative financing through debt securities and equity, coupled with some loan repayments. Loans to SME continued to increase, mainly from SMEs with large credit line. Meanwhile, loan growth to SMEs with small credit line improved, but it remained concentrated in some areas. Consumer loans expanded across all portfolios, driven by continued acceleration in auto loan Commercial Bank Loan Growth %yoy 218 Q1 Q2 25 Consumer SME Total Corporate Large Total Loan Corporate Loan Large Corporate Loan (excluding financial business) SME Loan (excluding financial business) Consumer Loan % Total Loan : Large corporate loan (excluding financial business) 23.9% SME loan (excluding financial business) 33.9% Consumer Loan 33.3% 4/12

7 Corporate loan : grew in several businesses. Corporate Loan Growth Structure of Corporate Loans as of June 218 (% to total loans) 5/12

8 Consumer loan : expanded across all portfolios, particularly in auto loan. Consumer Loan Growth Structure of Consumer Loans as of June 218 (% to total loans) 6/12

9 Loan quality : Overall NPL ratio has stabilized, while SM ratio of SME and consumer loans increased. %NPL %NPL to Total Loan %NPL SME Loan Non-Performaing Loans (NPLs) 218 Q1 Q2 SME Total Consumer Large %NPL to Large Corporate Loan %NPL Consumer Loan %SM %SM to Total Loan %SM SME Loan Special Mention (SM) 218 Q1 Q2 Consumer SME Total Large %SM Large Corporate Loan %SM Consumer Loan 7/12

10 Corporate loan quality : NPL declined in almost all sectors. 8 4 Non-Performing Loans (NPLs) %NPL Q1 Q1 Q2 Commerce Manufacturing Real Estate+Construction Services Public Utilities Mining %SM Special Mention (SM) Q1 Q1 Q2 Services Manufacturing Commerce Real Estate+Construction Public Utilities Mining Manufacturing Commerce Public Utilities Services Real Estate+Construction Mining Manufacturing Commerce Public Utilities Services Real Estate+Construction Mining 8/12

11 Consumer loan quality : NPL decreased mainly in unsecured loans, while loan quality of housing loans continued to deteriorate. %NPL Non-Performing Loans (NPLs) 218 Q1 Q2 Housing Credit Card Personal Auto Housing Auto Personal Credit Card %SM Special Mention (SM) 218 Q1 Q2 Auto Personal Credit Card Housing Housing Auto Personal Credit Card 9/12

12 Loan loss provision and capital fund remained high. Loan loss provision Capital fund % Billion Baht Loan loss provision expense (RHS) Actual/Regulatory loan loss provision ratio (LHS) % Basel III 218 Q1 Q2 CAR CET Tier /12

13 Banks net profit increased due to lower provisioning expenses and higher interest income. Profitability Return on Asset, Return on Equity and Net Interest Margin 11/12

14 Fee income was affected by fee-free retail fund transfer via internet and mobile banking transactions. Fee income decelerated from fund transfer and commission fees. Billions %yoy Q1 Q2 Fee Income Fund Transfer Fee Card/Cheque Transfer Commission Loan related fee Securities & Consulting Others %yoy Structure of fee income (as of June 218) Commission Fund Transfer Loan related fee 21% 11% 1% 4% 37% Securities and Consulting 17% Others Card / Cheque %YoY Fee Income %YoY Transfer Fee 12/13

15 The Thai banking system has sufficient liquidity to facilitate continued credit expansion. 13, 12, 11, 1, 9, Loan to Deposit Ratio Billion Baht % 14, Deposit Loan L/D Ratio [RHS] 8 Liquidity Coverage Ratio (LCR) Billion Baht % 5, 4, , 12 2, 8 1, 4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q High-quality Liquid Assets (HQLA) Liquidity Coverage Ratio (LCR) [RHS] 12/12

No. 29/2018 Performance of the Thai Banking System in the first Quarter of 2018

No. 29/2018 Performance of the Thai Banking System in the first Quarter of 2018 No. 29/218 Performance of the Thai Banking System in the first Quarter of 218 Ms. Daranee Saeju, Senior Director, Financial Institutions Strategy Department, Bank of Thailand, reported on the Thai banking