Thailand's banking sector maintained stability in the third quarter, supported by high levels of capital, loan loss provisions, and liquidity, despite an ongoing contraction in overall lending, the central bank said on Tuesday.
According to the Bank of Thailand, total commercial bank loans shrank 1 percent year-on-year in the July-September period, relatively unchanged from the previous quarter, driven by the continued decrease in SME and consumer loans, consistent with persistently high credit risks.
At the end of the third quarter, gross non-performing loans (NPLs) dropped to 544 billion baht (about 16.77 billion U.S. dollars). However, a contraction in the total loan base led to a slight increase in the NPL-to-total-loans ratio to 2.94 percent.
The banking sector's operating performance declined compared to the same period last year due to a reduction in net interest income caused by the contraction in lending volume and interest rate reductions extended to assist debtors, said the central bank's Assistant Governor Somchai Lertlarpwasin.
Given the economic slowdown and a sluggish income recovery, tight financial conditions and the debt repayment ability of small- and medium-sized businesses (SMEs) and households must be monitored going forward, Somchai told a news conference.
The Southeast Asian country's ratio of household debt to GDP fell to 86.8 percent at the end of the second quarter, from 87.1 percent in the first three months of the year, largely owing to the slowdown in new household borrowing, he noted.