No. 4/ Performance of the Thai Banking System in the Second Quarter of Mr. Don Nakornthab, Senior Director, Financial Institutions Policy Group, reported that the Thai banking system s performance in the second quarter of remained sound with high level of loan loss provision and capital fund to facilitate credit expansion and economic recovery going forward. This was despite the fact that gradual economic growth had affected loan growth and credit quality, thereby affecting bank profitability. Details are as follows. Weak loan demand amid gradual economic recovery led to subdued loan growth at 3.3% year-on-year. Corporate loan growth increased slightly mainly due to loans for acquisition of large retailers, while consumer loan growth continued to decline. Corporate loans (67.9% of total loans) expanded at.% year-on-year, contributed mainly by growth in the financial business (due to loans for acquisition of large retailers), services and construction. Loans contracted in the manufacturing and real estate sector, while loan growth of the commerce sector turned to positive after contracting for two consecutive quarters. Consumer loans (3.1% of total loans) continued to decelerate to 6.% as household confidence in spending still softened and banks remained vigilant on their credit standards for personal loans, particularly unsecured loans. Housing loans expanded well despite some slowdown after the government s property stimulus measures ended in April. Car loans exhibited a positive growth for the third consecutive quarter in line with increased car sales. Credit card loans increased from last quarter, attributable to the government s stimulus measures to encourage spending in April. Loan quality continued to decline in both corporate, especially in SMEs, and consumer loans. Non-Performing Loans (NPLs) recorded at 373.7 billion baht, increased by.3 billion baht from last quarter, resulting in gross NPL-to-total loan ratio of.7%, up from
.64%. Special mention loans (SMs : loan overdue above 1 month but not more than 3 months) amounted to 97.9 billion baht, declined by 8 billion baht from last quarter, thereby reducing SM-to-total loan ratio to.17% from.6%. Banks continued to accumulate high level of loan loss provision to cushion for loan quality deterioration. As a result, total provision increased to 49.8 billion baht, with nearly the same incremental amount as last quarter of 4. billion baht, and the ratio of actual to regulatory loan loss provision increased to 1.3% from % in the last quarter. In the second quarter of, the banking system recorded operating profits of 97.6 billion baht or 3.1% year-on-year growth. Even though banks cut their loan rates in this quarter and income on investments and treasury business declined as a result of low bond yield, the operating profits increased from funding cost management and dividend income. Net profits amounted to.9 billion baht or 4.6% decline year-on-year, due to increased provisioning expenses to cushion for potential loan quality deterioration from economic slowdown. Net interest margin (NIM) and return on assets (ROA) stabled at.6% and 1.%, respectively. Overall financial performance of the Thai banking system remained sound, with capital fund totaling at,73.7 billion baht and capital adequacy ratio (BIS ratio) stood at 17.%. Bank of Thailand August 11, Contact: Financial Performance and Loan Analysis Team Tel: +66 () 83 98 e-mail: FP&LATeam@bot.or.th
Performance of the Thai Banking System in the Second Quarter of
Overall Performance of the Thai Banking System in the Second Quarter of The Thai banking system remained sound with high level of loan loss provision and capital fund, although gradual economic growth had affected loan growth and credit quality, thereby affecting bank profitability. Loan growth remained subdued at 3.3%yoy, with slight increase in corporate loans as a result of loans for acquisition of large retailers, while consumer loans continued to decline. Loan quality deteriorated further in both corporate loans, especially SME, and consumer loans. NPL-to-total loan ratio increased to.7% from.64% last quarter. Loan loss provision remained high. Ratio of actual to regulatory loan loss provision increased to 1.3%. Net profits were affected by increased provisioning expenses to cushion for loan quality deterioration. Capital fund remained high. BIS ratio and Tier-1 ratio stood at 17.% and.7%, respectively.
Loan growth remained subdued. Corporate loans expanded from acquisition of large retail businesses while consumer loans continued to decelerate. 3 GDP and Loan Growth Commercial Bank Loan Growth %yoy. 1 - -1 - Total Loan -. GDP (Constant Price) 3.3 3.3 %yoy 1-17... 6. 6. 3.3 3.3.. Total Loan Corporate Loan Large Corporate Loan SME Loan Consumer Loan Note : Loan given to an affiliate of one large corporate to fund acquisition of a large retailer is reported as SME loans, according to the definition of Small and Medium Enterprises (SMEs) by Ministry of Industry. If excluding this case, SME loan growth would be at 1.6%yoy, down from 3.1%yoy in the previous quarter.
Q1 Q1 Q1 Corporate loans expanded well in the financial business (acquisition of large retailers), services and construction, while contracting in the manufacturing and real estate sector. Q1 Q1 Q1 Q1 Q1 4 Corporate Loan Growth Structure of Corporate Loans as of June (% to total loans) %yoy 3 1-9.3 3.4 1.1 -. -4.8 18.4. -1.3 -.8 1.1 11. 9.1. 4.3-3.7 3.4 -.3.1.8 1.4 11.1 8. 7.6 9...4 9. 3. 3.7-1...7.6 1. 7.4 11. 4. 3.1 1.9. Public Utilities 7.3 Financial Business 9.8 Construction. Real Estate Services. 6.7 Commerce.6 Others 3. Corporate 7.9 Consumer Loan 3.1 Manufacturing 18.3 Manufacturing Commerce Financial Business Services Construction Real Estate Public Utilites Corporate (Total)
Q1 Q1 Q1 Consumer loans decelerated from housing and personal loans, while credit card loans increased. Q1 Q1 Consumer Loan Growth Structure of Consumer Loans as of June (% to total loans) %yoy 1..1 9.3 9.3 9. 8.4 1. 1.7 1.6 9.3 11.1 9.1.8 3.7.6 8. 6.4.4 6.3 1.8 7.4 7.1 6. 6. Corporate 67.9 Housing.3 Consumer Loan.1 Car 7.3 Personal 6.8 Credit card 1.7 - -3.4 Housing Car Personal Credit Card Consumer Loan
% to total loan : Large corporate loan 9.3% SME loan 38.6% Consumer loan 3.1% 6 Loan quality continued to decline in all loan types. Non-Performing Loans (NPLs) % to Total Loan 6 %NPL to Total Loan %NPL to Consumer Loan % NPL to Large Corporate Loan % NPL to SME Loan 4 3.76 3.69 3.77 3.64.7..4.8.6 1 1.8 1.73 1.8 Special Mention (SM) % to Total Loan %SM to Total Loan %SM to Consumer Loan 4 %SM to Large Corporate Loan %SM to SME Loan 3. 3. 3.63.6..17.4.7 1.89 1.64 1 1.37 1.1 Note : Loan given to an affiliate of one large corporate to fund acquisition of a large retailer is reported as SME loans, according to the definition of Small and Medium Enterprises (SMEs) by Ministry of Industry. If excluding this case, %NPL of SME loan would be at 3.84%, up from 3.69%, while %SM would be at.1%, down from.4% last quarter.
Corporate loan quality deteriorated in all sectors, particularly in manufacturing, real estate and construction sector. % to total loan : Manufacturing % Commerce % Real Estate+Construction 7 % Public Utilities 7 % Services 7% 7 Non-Performing Loans (NPLs) Special Mention (SM) % to loan 8 6 4.93 4.81 4.77.69 1.8 Manufacturing Public Utilities Real Estate + Construction Commerce Services 4.87.3 4.4 4.33.83.91.66.73 4.6 4. % to loan 8 6 4.93.69.7. Manufacturing Public Utilities Real Estate + Construction Commerce Services.8 3.4 3. 3. 3..1.43.6 1.77
Consumer loan quality deteriorated slightly in housing and personal loans, while NPL ratio of car and credit card loans declined. % to total loan : Housing 1 % Car 7 % Personal % Credit card 7% 8 Non-Performing Loans (NPLs) Special Mention (SM) % to loan 6 Housing Personal Credit Card Car 4.66 4. % to loan 1 8 Housing Personal Credit Card Car 7.73 8. 4 3 1.43.34 1.9 1.36.7.7..66.6 1.94 6 4 6. 1.88 1.7 1.7.38.18.18. 1. 1.
9 Loan loss provision remained high. % 18 Billion Baht 6.6 3 9 19 19 1 1 4 3 49. 1.3 38 38 34 4 3 1 1 Loan loss provision expense (RHS) Actual/Regulatory loan loss provision ratio (LHS)
Banks operating profits increased from funding cost management and dividend income, while net profits were affected by provisioning expense. 1 Profitability Return on Asset and Net Interest Margin Billion baht 4 17.3 17.3.8 3. 7. 1.6.3 3.1-4.6-1. 1 338 34 37 4 1 98 19 1 1 Q1/ / Operating profit Net profit %yoy Operating profit %yoy Net profit %yoy 1-1 - -3 % to asset 3... 1. 1....6.6..6.6 1.3 1.3 1.1 1. 1. Q1/ / NIM ROA
11 Capital fund remained high. % 1. 11.3 CAR Tier-1 17. 17..7.7 3.8.8.8 Tier- Basel lll Basel III regulation adopted in
Loan/(Deposit+BE) ratio increased due to increase in lending. Loan, Deposit and Borrowing Growth Loan to Deposit and Borrowing % yoy 1 1.7 1.1 Total Loan Deposit+B/E Deposit B/E and Borrowing 3.3 3.4 3.7 3. 11 1 1 9 9 8 8 7 % 9.4 87.8 Loan to Deposit and B/E Loan to Deposit B/E and Borrowing 94.8 96.4 89. 9.6