BoT: Loan growth may lag GDP uptick in 2020

19-Feb-2020 Intellasia | BangkokPost | 6:02 AM Print This Post

Banking loan growth could slow to levels below economic growth, while the bad loan ratio is expected to surpass 3 percent this year as the economy falters, says a senior official at the central bank.

Lending growth is predicted to exceed 2 percent this year, compared with growth of 2 percent and 6 percent in 2019 and 2018, respectively, said Tharith Panpiemras, senior director of banking supervision and risk assessment management at the Bank of Thailand.

“Total loan growth could outpace GDP growth if infrastructure investment escalates. The 5G auction is also a positive factor for corporate loan expansion this year,” he said.

Typically, banking loans grow two or three percentage points higher than GDP.

Lower loan growth in 2019 could be attributed to higher debt repayment by large corporations, said Tharith.

Wholesale customers also prefer to mobilise funds through bond and equity markets to refinance bank loans because of lower funding costs, he said.

The central bank in December downgraded Thailand’s economic growth forecast for 2020 to 2.8 percent from 3.3%, and is set to review the economic outlook in March amid mounting risks, including the coronavirus outbreak, the delayed fiscal 2020 budget and drought. Tharith said small-ticket commercial loans with a maximum credit line of 20 million baht per customer have been growing thanks to online shopping and food delivery businesses, in line with changing consumer behaviour.

Data analytics is a key factor that supports this year’s loan expansion, he said.

The non-performing loan (NPL) ratio of banks could surpass 3 percent this year, dampened by the economic doldrums, but the bad debt ratio is expected to be controllable as several banks implemented debt restructuring measures, said Tharith.

At the end of 2019, the gross NPL ratio of the banking sector was a tad higher at 2.98 percent from 2.94 percent a year before.

Loans for small and medium-sized enterprises (SMEs), housing, and cars are the main sources of rising distressed debt. NPLs for SMEs increased from 4.56 percent in 2018 to 4.63 percent in 2019, mortgage NPLs rose from 3.25 percent to 3.71 percent and bad auto loans climbed from 7.11 percent to 7.43%.

Special mention loans for the overall banking industry also increased from 2.42 percent at the end of 2018 to 2.79 percent last year.

Tharith said a recent cut in banks’ prime lending rates to follow the central bank’s footsteps in cutting the policy rate would not significantly affect financial institutions because 46 percent of the total loan portfolio is fixed rate. The remaining 54 percent is charged based on the minimum retail rate, minimum lending rate and minimum overdraft rate.

The central bank’s requirement for fee adjustment for three items comprising pre-payment, debt default and credit cards should not have a high impact on banks as such fees represent a minimal portion of banks’ total fee-based income, he said.

Fee-based income in the banking sector tallied 201 billion baht, accounting for 17 percent of total revenue, said Tharith, with 64.1 percent coming from interest income and 18.9 percent from other income.


Category: Thailand

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