New non-performing loans (NPLs) in the banking sector declined in the first quarter this year as banks became more cautious in extending credit, while re-entry NPLs continued to rise, driven by vulnerable borrower segments, according to the Bank of Thailand.
Somchai Lertlarpwasin, assistant governor for the financial institutions supervision group at the central bank, said last week the volume of new NPLs slowed across all loan portfolios in the first quarter year-on-year. The slowdown was attributed to continued debt assistance measures by banks, including debt restructuring, particularly preventative restructuring efforts.
The regulator's debt restructuring schemes were cited as contributing factors, in addition to debt assistance programmes offered to borrowers affected by the war in the Middle East.
"Banks undertook a relatively high level of preemptive debt restructuring to manage NPLs, while becoming more cautious in lending, as reflected in continued low loan growth. These factors contributed to slower growth in new NPLs and stability in NPL levels," he said.
However, re-entry NPLs continued to increase in the first quarter, primarily driven by vulnerable borrower segments, including small and medium-sized enterprises (SMEs) and retail borrowers.
According to the central bank, the total NPL ratio remained stable at 2.85% in the first quarter, up from 2.84% the previous quarter, while the NPL ratio for corporate loans remained unchanged at 1.34%. The NPL ratio for SMEs continued to increase, rising to 9.16% in the first quarter from 9.03% in the previous quarter.
Regarding consumer loans, the NPL ratio edged up to 3.19% in the first quarter from 3.17% in the previous quarter. The increase was mainly driven by credit card loans, whose NPL ratio rose to 2.81% from 2.73%. Mortgage NPLs also increased slightly to 3.79% from 3.75%, largely attributable to self-employed borrowers earning less than 100,000 baht per month.
Given sluggish loan growth in the banking industry amid heightened uncertainty and rising borrower credit risk, the Finance Ministry and central bank implemented special loan packages dubbed SME Credit Boost and SME Secured Plus to support loan expansion. The regulator is expanding the criteria for SME Credit Boost to cover business borrowers affected by the Middle East war. The initiative initially focused on SMEs and corporations aligned with the "Reinvent Thailand" white paper, as well as efforts to improve operational efficiency.
In the first quarter, banking loans grew 0.2%, the first gain in two years, driven by working capital loans to manage operating costs.
