Performance of the Thai Banking System in the Third ...
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No. 83/2021 Performance of the Thai Banking System in the Third Quarter of 2021 Ms. Suwannee Jatsadasak, Senior Director, Bank of Thailand, reported on the Thai banking system’s performance in the third quarter of 2021 that the Thai banking system remained resilient with high levels of capital fund, loan loss provision and liquidity to serve an important role in assisting borrowers and accommodating loan demand to support economic recovery amidst uncertain COVID-19 situation. Credit assistance measures, along with revisions to rules on loan classification and provisioning, helped alleviate the deterioration of bank loan quality. Meanwhile, the banking system’s profitability improved from the same period last year mainly due to lower provisioning expenses as well as effective cost management. Details are as follows: The Thai banking system capital fund stood at 3,024. 8 billion baht, equivalent to capital adequacy ratio (BIS ratio) of 19.9%. Loan loss provision remained high at 872.0 billion baht with NPL coverage ratio of 155.0%. Liquidity coverage ratio (LCR) registered at 186.8%. In the third quarter of 2021, banks’ overall loan growth was 5.6% year-on-year, increasing from 3.7% in the previous quarter. Bank loans continued to grow from last quarter, even after excluding loans to government and financial assistance measures. Details on bank loans are as follows: Corporate loans expanded at 6.3% year-on-year due to an increase in large corporates’ loans 1 across almost all sectors as well as loans to government. This reflects financing needs of businesses following the relaxation of containment measures and the improving economic activities related to the country’s reopening. In addition, SME loans 2 continued to grow owing primarily to rehabilitation credit scheme. Consumer loans expanded at 4.2% year-on-year, declining from 5.7% in the previous quarter. Auto loan and credit card loan growth slightly contracted, due respectively to a reduction in domestic car sales and lower credit card spending during the containment measures. Mortgage loans expanded at a slower pace in line with declining demand for 1 Corporates with a credit line more than 500 million baht with a bank as of September 2021. 2 Corporates with a credit line not exceeding 500 million baht with a bank as of September 2021.
Transcript of Performance of the Thai Banking System in the Third ...
No. 83/2021
Performance of the Thai Banking System in the Third Quarter of 2021
Ms. Suwannee Jatsadasak, Senior Director, Bank of Thailand, reported on the Thai banking system’s performance in the third quarter of 2021 that the Thai banking system remained resilient with high levels of capital fund, loan loss provision and liquidity to serve an important role in assisting borrowers and accommodating loan demand to support economic recovery amidst uncertain COVID-19 situation. Credit assistance measures, along with revisions to rules on loan classification and provisioning, helped alleviate the deterioration of bank loan quality. Meanwhile, the banking system’s profitability improved from the same period last year mainly due to lower provisioning expenses as well as effective cost management. Details are as follows:
The Thai banking system capital fund stood at 3,024. 8 billion baht, equivalent to capital adequacy ratio (BIS ratio) of 19.9%. Loan loss provision remained high at 872.0 billion baht with NPL coverage ratio of 155.0%. Liquidity coverage ratio (LCR) registered at 186.8%.
In the third quarter of 2021, banks’ overall loan growth was 5.6% year-on-year, increasing from 3.7% in the previous quarter. Bank loans continued to grow from last quarter, even after excluding loans to government and financial assistance measures. Details on bank loans are as follows:
Corporate loans expanded at 6.3% year-on-year due to an increase in large corporates’ loans1 across almost all sectors as well as loans to government. This reflects financing needs of businesses following the relaxation of containment measures and the improving economic activities related to the country’s reopening. In addition, SME loans2 continued to grow owing primarily to rehabilitation credit scheme.
Consumer loans expanded at 4.2% year-on-year, declining from 5.7% in the previous quarter. Auto loan and credit card loan growth slightly contracted, due respectively to a reduction in domestic car sales and lower credit card spending during the containment measures. Mortgage loans expanded at a slower pace in line with declining demand for
1 Corporates with a credit line more than 500 million baht with a bank as of September 2021. 2 Corporates with a credit line not exceeding 500 million baht with a bank as of September 2021.
residential properties. Personal loans grew at the same pace as the previous quarter, following an increase in household liquidity needs.
Bank loan quality in the third quarter of 2021 weakened only slightly, supported by financial assistance as well as revisions to rules on loan classification. The gross non-performing loans (NPL or stage 3) increased to 546.3 billion baht, equivalent to the NPL ratio of 3.14%. Meanwhile, the ratio of loans with significant increase in credit risk (SICR or stage 2) to total loans stood at 6.69%, increasing from 6.34% in the previous quarter.
The banking system recorded a net profit of 38.5 billion baht in the third quarter of 2021, increasing 45.1% from the same quarter last year. This was mainly attributed to a decrease in provisioning expenses, as banks set aside an elevated level of provision in 2020, coupled with banks’ effective cost management. Meanwhile, net interest income slightly increased due to loan expansion. However, compared to the previous quarter, net profit declined due to non-interest income following a decline in dividend income from the high base last quarter, together with an increase in provisioning expenses. Consequently, the return on asset ratio (ROA) decreased to 0.69% from 1.09% in the previous quarter. Meanwhile, the ratio of net interest income to average interest-earning assets (Net Interest Margin: NIM) remained stable at 2.47%.
Bank of Thailand November 12, 2021
For further information, please contact: Banking Risk Assessment Division Tel: +66 2283 5980 Email: [email protected]
Performance of the Thai Banking System
in the Third Quarter of 202112 November 2021
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Overall Performance of the Thai Banking Systemin the Third Quarter of 2021
Bankresilience
Loan growth
Loan quality
Profitability
The Thai banking system remained resilient with high levels of capital fund, liquidity and loan loss provision.
Total loan growth increased from corporate loans, particularly large corporate. Meanwhile, SME loans improved owing primarily to the rehabilitation credit scheme.
Consumer loans expanded at a slower pace, in line with a decline in household consumption during the containment measures.
NPL ratio slightly increased under credit assistance measures and revisions to rules on loan classification.
Banking system’s profitability improved compared to the same period last year due to lower provisioning expenses and banks’ effective cost management. Net interest income slightly increased due to loan expansion.
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The Thai banking system’s capital fund, loan loss provision and liquidity remained at high levels.
19.9% 155.0% 186.8% 93.8%
Capital fund remained stable as some banks issued perpetual bonds (Additional Tier 1) and subordinated notes (Tier 2). The elimination of related party transactions from bank merger resulted in a slight decrease in capital funds.
Banks increased their provisions as a buffer against potential loan quality deterioration from the COVID-19 pandemic.
All banks maintained high levels of LCR above the minimum requirement of 100%.
Loans and deposits continued to expand, with loans growing at a higher rate than deposits which rose mainly from savings by retail depositors and businesses.
BIS ratio remained stable Loan loss provision increasedLCR remained stable
at a high level L/D ratio increased
Capital fund(BIS ratio)
Loan loss provision to NPL(NPL coverage ratio)
Liquidity Coverage Ratio(LCR)
Loan to deposit ratio(L/D ratio)
Note: Definition of NPL coverage ratio was revised in accordance to TFRS 9: before Q1/2020 : Loan loss provision (principle only) / NPL outstanding (principle only)after Q1/2020 : Loan loss provision (loan principle + accrued interest + contingent liability) / NPL outstanding (principle + accrued interest).
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Real GDP Bank loan Bond
2017 2018 2019 20Q1 20Q2
Fund raising through bank loans and corporate bonds increased in line with financing needs of businesses following the relaxation of the containment measures and the improving
economic activities related to the country’s reopening.
Note: Growth rate compared to the same period last year
20Q3 20Q4
%yoy %yoy %yoy
21Q1 21Q2
4.2 4.46.0
4.26.0
12.4
2.3 2.0
9.6
-2.1
4.1
7.7
-12.1
5.0 4.5
-6.4
4.6 7.5
-4.2
5.1 3.8
-2.6
3.81.2
7.5
3.7
7.05.68.1
21Q3
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Bank loans expanded mainly due to business loans, both to corporate and SMEs, while consumer loans grew at a slower pace.
Note: Growth rate compared to the same period last year | *Corporates with a credit line with a bank (excluding financial business) | A number in parentheses indicates share of total loans.
3.7
5.6
0
4
8
12
16
0123456
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
19 20 21
Millio
nsOutstanding (RHS) %YoY
Trillion baht
Bank loan growth Loan growth classified by loan portfolios Corporate loan growth classified by size
2.6
6.35.7
4.2
0
3
6
9
12
-202468
1012
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
19 20 21
Millio
ns
Corporate outstanding (RHS) Consumer outstanding (RHS)Corporate (%YoY) Consumer (%YoY)
Trillion baht
1.0 2.3 3.5
9.5
-0.9 0.0
0123456
-10
-5
0
5
10
15
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
19 20 21
Millio
ns
outstanding (≤500 MB) (RHS) outstanding (>500 MB) (RHS)Credit line ≤500 MB* (%YoY) Credit line >500 MB* (%YoY)
Trillion baht
(34.9%)(65.1%) (22.6%)(33.6%)
excluding soft loan and rehabilitation loan
%yoy %yoy %yoy
The banks’ total loan growth increased from the previous quarter, in line with loan
demand from businesses.
Corporate loans expanded, consistent with the improving economic activities related to
the country’s reopening. Meanwhile, consumer loan growth grew at a slower pace.
Large corporate loan expanded across almost all sectors including loans to government.
While SME loans continued to grow even excluding soft loan and rehabilitation loan.
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Consumer loans expanded at a slower pace, in line with a decline in household consumption during the containment measures.
Consumer loan growth Mortgage (17.5%) Auto (7.8%)
Credit card (1.6%) Personal (8.0%)
%yoy %yoy
%yoy
Trillion baht%yoy Trillion baht
Trillion baht
5.74.2
0
2
4
6
0
4
8
12
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
19 20 21
Millio
ns
Outstanding (RHS) %YoY
Trillion baht
Trillion baht
Mortgage loans expanded at a slower pace in line with declining demand for residential properties.
Auto loan growth contracted due to a reduction in domestic car sales.
Credit card loan growth slightly contracted due to lower credit card spending during the containment measures.
Personal loans grew at the same pace as the previous quarter, following an increase in household liquidity needs.
Note: Growth rate compared to the same period last year | A number in parentheses indicates share of total loans. | Residential transfer value during Jul – Aug 2021.
6.8 5.7
0
1
2
3
-30
-15
0
15
30
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
19 20 21Residential transfer value inBangkok and vicinity (%YoY)%YoY
%yoy
1.0 -1.6
0.0
0.6
1.2
-60-40-20
0204060
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
19 20 21Outstanding (RHS)%YoYDomestic car sales (%YoY)
5.0
-0.8
0.0
0.3
-40
-20
0
20
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
19 20 21
Millio
ns
Outstanding (RHS)%YoYValue of credit card usage (%YoY)
8.48.2
0.0
0.7
1.4
-20
0
20
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
19 20 21
Millio
ns
Outstanding (RHS)%YoYPrivate consumption index (%YoY)
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Stage 3 classified by loan portfolios Stage 3 of corporate loan classified by sizeStage 3 (NPL) and Stage 2 of total loan
% % %
Loan quality slightly deteriorated, as reflected by a marginal increase in the NPL ratioamid credit assistance measures and revisions to rules on loan classification.
*According to the new accounting regulations (TFRS9), stage 2 is defined as loans with significant increase in credit risk (SICR), having a wider coverage than SM.
2.94 2.95 3.01 2.98 3.04 3.09 3.14 3.12 3.10 3.09 3.14
2.56 2.74 2.59 2.79
7.69 7.49 7.03 6.62 6.42 6.34 6.69
0
4
8
12
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
19 20 21
Stage 3 (NPL) Stage 2* (from Jan 20)
3.17 3.25
2.92 2.89
0
2
4
6
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
19 20 21
Corporate Consumer
7.17 7.18
2.50 2.41
0
2
4
6
8
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
19 20 21
Credit line ≤500 MB Credit line >500 MB
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Overall, consumer loans’ NPL ratio slightly improved, partly from NPL management.
Mortgage Auto
Credit card Personal
%
%
%
%
*According to the new accounting regulations (TFRS9), stage 2 is defined as loans with significant increase in credit risk (SICR), having a wider coverage than SM.
3.35 3.34 3.49 3.71 4.04 4.04 3.88 3.78 3.74 3.66 3.621.67 1.78 1.82 1.89
6.65 6.03 5.66 5.81 5.30 5.45 5.29
0
5
10
15
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q319 20 21Stage 3 Stage 2* (from Jan 20)
1.71 1.82 1.86 1.86 2.09 1.88 1.58 1.44 1.56 1.61 1.72
6.90 7.30 7.42 7.439.65 9.62 9.18 9.51 9.75 10.51
11.85
0
5
10
15
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q319 20 21Stage 3 Stage 2* (from Jan 20)
2.67 2.48 2.65 2.413.50 3.00 2.42 2.38 3.04 3.51 3.00
1.80 1.91 1.94 1.97
8.547.60 8.96
6.527.43 7.30 7.95
0
5
10
15
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q319 20 21Stage 3 Stage 2* (from Jan 20)
2.56 2.42 2.36 2.33 2.61 2.45 2.26 2.37 2.46 2.47 2.432.26 2.31 2.18 2.30
6.53 6.03 6.03 6.25 5.85 5.60 6.01
0
5
10
15
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q319 20 21Stage 3 Stage 2* (from Jan 20)
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The banking system’s profitability increased from the same quarter last year due to lower provisioning expenses compared to the elevated level in 2020,
as well as banks’ effective cost management.
Note: * Numbers in parentheses represent year-on-year growth rate after adjusting for an extraordinary item from interest income from loans in relation to partial payment from the auction of mortgage guarantee assets in Q3/2020.
** Numbers in parentheses excluding extraordinary items from dividend income and interest income from loans in relation to partial payment from the auction of mortgaged guarantee assets in 9M/2020 and the recognition of gains on investments from the sales of shares in a subsidiary in 9M/2021
NIM
ROA
ROE
Financial ratiosNet interest income
Provisioning expenses
Operating profit
Net profit
BillionBaht
BillionBaht
BillionBaht
BillionBaht
128 125 124 128 129
20Q3 20Q4 21Q1 21Q2 21Q3
%yoy1.1%
484 504 522
381
18 19 20 9M21
59 50 42 50 54
20Q3 20Q4 21Q1 21Q2 21Q3
%yoy-8.6%
%yoy-19%
149163
230
146
18 19 20 9M21
398500
405318
18 19 20 9M21
90 74 96 121 101
20Q3 20Q4 21Q1 21Q2 21Q3
%yoy12.0%
%yoy -3.7%
207271
146 143
18 19 20 9M21
27 1744 60 39
20Q3 20Q4 21Q1 21Q2 21Q3
%yoy45.1%
%yoy10.5%
(52.1%)*(26.6%)**
(13.5%)*(0.6%)**
2.47%
0.69%
5.00%
2.46%
1.09%
7.62%
21Q2 21Q3 9M21
2.47%
0.86%
6.14%
(2.1%)*(-2.7%)**
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Debt Restructuring throughAsset Warehousing*
Rehabilitation Loan
Well-distributed by size, business sector and region
124,836 MBAverage credit line
3.2 MB/debtor39,095 debtors
Financial institutions and debtors have to negotiate the terms and conditions.
43.5%of debtors are in
commerce and service sectors.
of debtors are from provincial areas.
67.0% 67.8%by existing credit lines
by credit lineby debtors
Note: Related laws on tax benefits and bad debt disposal for operations under asset warehousing scheme have been effective from July 14, 2021 onwards.
Debtors (%) Debtors (%) Debtors (%)
Development in financial rehabilitation measures as of November 8, 2021
Number of debtors under loan schemeApproved loan amount
of debtors are SMEs(existing credit lines
>5 - 50 MB)SMEs43.5%
Micro40.2%
New debtors8.4%
Corp7.9%
SMEs45.0%
Corp37.3%
Micro9.2%
New debtors8.5%
Approved loan amount
24,374 MB 168 debtorsNumber of debtors under
the scheme
Many entrepreneurs have shown interests and are in the process of negotiating with financial institutions.
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Development in credit assistance from financial institutions
Credit assistance
Financial institutions’ loan under assistance
July 2020 September 2021
Total 12.52 6.70
Large corporates 0.03 0.03
SMEs 1.17 0.63
Retail consumers 11.31 6.04
Number of accounts under assistance (Million accounts)
4,656 5,117
6,884 7,195 6,8976,6566,038 5,669
4,8353,8033,869 3,700 3,178 3,210 3,287 3,349
3,6333,824
0
2,000
4,000
6,000
8,000
10,000
Apr-2
0
May-2
0
Jun-
20
Jul-2
0
Aug-2
0
Sep-
20
Oct-2
0
Nov-
20
Dec-2
0
Jan-
21
Feb-
21
Mar-2
1
Apr-2
1
May-2
1
Jun-
21
Jul-2
1
Aug-2
1
Sep-
21
Bilion Baht
Corporate SMEs Retail consumers Total loan under relief measures
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Key takeaways
1
Thai banking system remained resilient with high levels of loan loss provision, liquidity and capital fund to serve an important role in assisting borrowers and accommodating loan demand to support economic recovery, which remains highly uncertain due
to the COVID-19 pandemic.
2The loan quality slightly deteriorated under credit assistance
measures and revisions to rules on loan classification. Additional measures to support sustainable debt restructuring are expected to help mitigate the impact on debtors amid the highly
uncertain situation and facilitate the economic recovery.
