Performance of the Thai Banking System in the First Quarter of 2015

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1 No. 26/2 Performance of the Thai Banking System in the First Quarter of 2 Mr. Jaturong Jantarangs, Senior Director, Financial Institutions Policy Group, reported the Thai banking system s performance in the first quarter of 2 to remain resilient, with slower loan growth and slight deterioration of loan quality in line with slower-than-expected economic recovery. Nevertheless, the banking system maintained high level of provision and capital, with continued profit. Details are as follows. The slower-than-expected economic recovery coupled with decelerated demand for corporate credit as a result of the economic slowdown led to slower loan growth at 4.3%, compared with.% in the previous quarter. Corporate loan (68.7% of total loan) continued to expand at a decelerated rate of 2.9%. The slowdown was attributed mainly to commerce sector, whereas public utilities sector especially power plants, logistics and warehouses exhibited high loan growth. Loan to large corporate grew at 1.%, down from 4.6% last quarter as large corporate turned to raising fund through financial instruments instead of bank loan. SME loan started to pick up and grew faster at 4.%, after continued slowdown since the beginning of 2. Consumer loan (31.3% of total loan) growth at 7.6% was relatively stable from last quarter, with expansion in personal loan and housing loan in contrast with continued contraction of car loan at 4.%, compared to the same period last year. Overall loan quality deteriorated from SME loan and consumer loan. Non-Performing Loan (NPL) recorded at billion baht, increasing by 21.1 billion baht from last quarter (compared with. trillion baht of total loan). Gross NPL to total loan ratio increased to 2.29% from 2.% in the previous quarter. NPL ratio of large corporate was stable, while that of small SME and consumer loan increased, mainly from housing loan and collateralized personal loan. Special mention loan (SM : loan overdue above 1 month but not more than 3 months) increased from various loan types to billion baht, bringing SM to total loan ratio up from

2 2.61% to 2.81%. However, banks have closely monitored and managed their loan portfolio, and the ratio of actual to regulatory loan loss provision remained high at 16.9%. The banking system had net profit of 2. billion baht in the first quarter of 2, close to the level in the same period of last year, with increased profit from valuation of financial instruments and sale of debt securities, as well as a decline in operating expenses. Capital fund of the banking system recorded at 2,2.1 billion baht, declining by 18.1 billion baht from last year as a result of redemption and gradual deduction of Tier-2 instruments not eligible under Basel III capital requirements. Thus, capital adequacy ratio (BIS ratio) decreased slightly to 16.6%, while Tier-1 ratio was stable at.7%. Bank of Thailand May, 2 Contact: Financial Performance and Loan Analysis Team Tel: +66 ()

3 Performance of the Thai Banking System in the First Quarter of 2

4 Overall Performance of the Thai Banking System in the First Quarter of 2 Loan of the banking system still grew, though at a slower rate, in line with the economic slowdown. Overall the banking system was resilient with continued profit Loan grew at 4.3%yoy, continuing to slow down in line with economic conditions. Loan to large corporate decelerated as they turned to raising fund through capital market to replace bank loan. Meanwhile, loan to SME and consumer continued to expand with higher growth rate in SME loan. Overall loan quality deteriorated from SME and consumer loan. NPL to total loan ratio increased to 2.29% from 2.% in the previous quarter. Loan loss provision remained high. Ratio of actual to regulatory loan loss provision was at 16.9%. The banking system remained profitable this quarter from trading activities and sale of investment in securities. Net profit increased by 1.4%yoy. Capital fund remained high. BIS ratio and Tier-1 ratio stood at 16.6% and.7%, respectively. 2

5 Loan growth slowed down in line with the economic conditions %yoy GDP and Loan Growth Total Loan GDP (Constant Price) % yoy Commercial Bank Loan Growth Total Loan Large Corporate Loan Consumer Loan Corporate Loan SME Loan Outstanding (Billion baht) Growth (%yoy) Large Corporate SME Consumer Total Large Corporate SME Consumer Total 2 3,4 3,994 3,21 1, ,7 4,241 3,493, /2 3,4 4,3 3,2,

6 / / / / / / / %yoy Corporate Loan Growth Corporate Loan Corporate loan continued to expand at a decelerated rate in almost all sectors, except public utilities sector that still exhibited high loan growth. Loan to commerce sector decelerated this quarter as some retail business raised fund through capital market to repay bank loan Manufacturing Commerce Financial Business Services Construction Real Estate Public Utilites Structure of Corporate Loan as of March 2 (% to total loan) Public Utilities Services Real Estate Financial Business Corporate 7 Commerce Construction Others Manufacturing Consumer 31.3 Outstanding (Billion baht) Manufacturing Commerce Financial Business Services Construction Real Estate Public Utilities Others Total 2 2,172 1,748 1, ,4 2 2,24 1,838 1, ,748 /2 2,24 1,818 1, ,73 4

7 / / / / Consumer Loan Consumer loan expanded well, except for car loan which continued to contract after high growth in previous periods. %yoy 4 Consumer Loan Growth Structure of Consumer Loan as of March 2 (% to total loan) Corporate Housing.2 Consumer Car 7.6 Personal Caredit Card -1 Housing Car Personal Credit Card Outstanding (Billion baht) Housing Car Personal Credit Card 2 1, , /2 1,

8 Loan quality overall deteriorated from SME and consumer loan % to Total Loan Non-Performing Loan (NPL) % NPL to Total laon % NPL to Consumer Loan % NPL to Large Corporate Loan % NPL to SME Loan % to Total Loan Special Mention (SM) % SM to Total laon % SM to Consumer Loan % SM to Large Corporate Loan % SM to SME Loan Outstanding NPL SM Loan* (Billion baht) Large SME Consumer Total Large SME Consumer Total Large SME Consumer Total , ,28.3 3,2.6, , , ,492.6,872.9 / ,978. 4,28. 3,24.8, *Include interbank loan

9 Corporate Loan Quality % to loan Non-Performing Loan (NPL) Manufacturing Commerce Public Utilities Services Real Estate + Construction % to loan 1 Special Mention (SM) % to total loan : Manufacturing % Commerce % Real Estate+Construction % Public Utilities % Services % Manufacturing Commerce Public Utilities Services Real Estate + Construction Corproate Loan (Billion baht) Manufacturing Commerce Public Utilities Services Real Estate + Construction NPL SM Loan* 2, , NPL SM Loan* 2,24.3 1, NPL /2 SM Loan* 2,23.6 1, *Include Interbank loan

10 Consumer Loan Quality % to loan Non-Performing Loan (NPL) Housing Personal Credit Card Car % to loan Special Mention (SM) Housing Personal Credit Card Car Outstanding (Billion baht) NPL SM Loan* Housing Car Personal Credit Card Housing Car Personal Credit Card Housing Car Personal Credit Card , , / , *Include interbank loan 8 % to total loan : Housing 1 % Car % Personal % Credit card %

11 Loan loss provision remained high % Actual / Regulatory loan loss provision ratio Loan Loss Provision (Billion baht) Actual Provision Regulatory Provision /

12 Banks remained profitable from trading activities and sale of investment in securities Billion baht %yoy 2.3%yoy 3.8%yoy %yoy.%yoy 21.1%yoy Operating Profit Net Profit.6%qoq 6.7%yoy 7.9%qoq 1.4%yoy 89 2 / % to asset Q4/ / NIM ROA 1

13 Capital fund remained high % 2 2 CAR Tier Tier-2 Basel lll New accounting standard on employee benefits adopted in 2 Basel III regulation adopted in 2 Total Capital 2 2 /2 Outstanding (Billion baht) 1,8 2,43 2,2

14 Liquidity eased further this quarter Loan, deposit and Borrowing Growth Loan to Deposit and Borrowing % yoy Loan Deposit+B/E Deposit B/E and Borrowing. 4.3 % Loan to Deposit and B/E Loan to Deposit B/E and Borrowing Outstanding (Billion baht) Loan Deposit and B/E Deposit, B/E and Borrowing 2 1,7,82,82 2,241,741,3 /2,2,9,636