BoT worried over possible rise in NPLs

A deserted street in Silom Soi 4, Bangkok. Bloomberg
A deserted street in Silom Soi 4, Bangkok. Bloomberg

The Bank of Thailand (BoT) is concerned with the expected higher number of non-performing loans (NPLs) of tourism-related businesses in the second quarter of this year because of the the third wave of Covid-19.

Both the BoT and financial institutions are concerned about rising NPLs in the tourism sector and tourism-related businesses, including aviation, transportation, and restaurants, which are suffering from the severe outbreak.

The central bank has been closely monitoring these industries and it is ready to offer financial assistance if necessary, said BoT senior director for regulatory policy department 2, Suwannee Jatsadasak.

The central bank announced that the commercial banking sector’s NPL ratio or stage 3 loans, which is classified under the Thai Financial Reporting Standard number 9 (TFRS9), for the first quarter of 2021 was at 3.10% of total loans outstanding of the overall commercial banking sector.

The NPL ratio continued to decline from 3.14% in the third quarter of 2020 to 3.12% in the fourth quarter last year, mainly because of the BoT’s debt restructuring measures offered to both commercial and retail loan borrowers, Ms Suwannee said.

For the first quarter of 2021, the NPL ratio of commercial loans was 3.17%, a decline from 3.23% and 3.24% in the fourth and the third quarters of last year, respectively.

Meanwhile, the NPL ratio of consumer loans was 2.92% in the first quarter of 2021, rising from 2.85% and 2.91% in the fourth quarter and the third quarter of 2020, respectively.

At the same time, the late-payment loan ratio, which is classified as stage 2, declined from 7.03% in the third quarter of 2020 to 6.62% in the fourth quarter last year, and to 6.41% in the first quarter of 2021.

Ms Suwannee said the BoT implemented a third phase of debt relief for consumer loans on Friday and commercial loan restructuring through asset warehousing and an amended-soft loan scheme from April 26 this year. With the fresh debt aid measures, it would help to contain the distressed-debt of overall banking sector.

“Despite the third wave infections emerging in April, the commercial banking sector may not need to increase loan loss reserve significantly in the second quarter because of the exiting solid cushion,” she said.

Provisions for loan loss in commercial banking sector was at around 44 billion baht in the first quarter of 2021, down 14% year-on-year. The banking system set aside a massive reserve of around 240 billion baht for 2020.

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