Thailand's household debt reaches 10 trillion baht for Q2 2014

[webfact]

Household debt reaches 10 trillion baht for Q2 2014

BANGKOK, 2 October 2014 (NNT) - The Bank of Thailand (BOT) has reported that Thailand’s total household debt during the second quarter of this year now stands at 10 trillion baht.

Household debt in Thailand, which makes up 84 percent of the country’s GDP, has increased by 752 billion baht, or 8.11 percent compared to last year's figure.

According to the BOT, the massive rise in household debts could be attributed to an increase in one-month defaults on consumer loans and lower credit quality on car loans and personal loans.

Meanwhile, Kasikorn Bank Executive Vice-President Teeranun Srihong expressed his concerns about the high levels of household debt. He said that personal loans make up 20 percent of the bank’s total loans, whereas the majority of the loans are SME loans.

Mr. Teeranun believes that this year’s loans could grow by 6-7 percent, a bit lower than the 8 percent target.


-- NNT 2014-10-02

[khunpa]

Well, with an economy basically in recession, huge political problems and tourists running away, that should not be a problem, should it?

I would suggest more crackdowns on visa runners and long-term foreigners here. They must be to blame.

Edited October 2, 2014 by khunpa

[Zooheekock]

Household debt in Thailand, which makes up 84 percent of the country’s GDP

Yikes. That's not good. I wonder how badly banks have exposed themselves to international markets to finance this (a la Northern Rock). Could get a little nasty, there.

[jucel]

All the pieces are falling into place.

[Costas2008]

I can't speak about Thailand but only for where I live in Issan.

People have no concept of financial planning.

Just get money where it's available to them and forget about the future, paying back.

Repossessions have started happening already and the situation will get worst.

[clockman]

They only live for the moment!

[meand]

This is what happens when people who make 500 baht a day NEED an Iphone.

[jucel]

This is what happens when people who make 500 baht a day NEED an Iphone.

Yeh, I was thinking of ordering one off ebay for my Dad to bring from the UK, when he comes next month. However, they are about 700 quid unlocked!!

Thais are paying close to 100k baht for them.

[Zooheekock]

In answer to my own question, it seems like there has been a pretty sharp increase in exposure to short-term, international debt which, in light of changes to American policy, now looks highly unwise. Stow the sails and batten the hatches.

[cloudhopper]

In answer to my own question, it seems like there has been a pretty sharp increase in exposure to short-term, international debt which, in light of changes to American policy, now looks highly unwise. Stow the sails and batten the hatches.

Historically economic downturns are almost always preceded by a rapid increase in household debt like we are seeing now. The banks that finance it are at greatest risk by borrowing short and loaning long.

[khunpa]

Good thing:

Soon a wide range of very cheap houses to choose from, if you have the money and need a house.

[shirtless]

People here and in the west need to live within their means.

[NeverSure]

Good thing:

Soon a wide range of very cheap houses to choose from, if you have the money and need a house.

Could be, but don't forget that Thais aren't in the habit of lowering the price on anything no matter how long it sits. After 1997 some buildings just sat and rotted.

In a Western country, if a house or care was taken back for default, the bank would have to mark the asset to market. In other words if they were carrying a car on their books as collateral for 1 million baht but it's was reposessed and it's true value was 700K baht, they'd have to write a loss on their books for 300K baht. Enough of that and the bank runs out of its own capital and is bust. That happened in the US and many banks needed bailout loans.

But Thailand refuses to mark to market or sell at market; both of which would trigger a loss of the bank's own capital. I don't know how they get away with it. See the rice scheme and the nearly 1 trillion baht borrowed from the Ag Bank for rice that either doesn't exist or is rotten and no sales have been made. Even if they sold it they paid way above world market value. But they just keep carrying that collateral on their books as it it was there to cover the loans.

I do know they borrowed some money from the IMF after 1997 but I don't know if they paid it back.

All in all I wouldn't put more money in a Thai bank than I needed for next month's expenses.

[Nickymaster]

Well, with an economy basically in recession, huge political problems and tourists running away, that should not be a problem, should it?

I would suggest more crackdowns on visa runners and long-term foreigners here. They must be to blame.

Why?

[cloudhopper]

Good thing:

Soon a wide range of very cheap houses to choose from, if you have the money and need a house.

Could be, but don't forget that Thais aren't in the habit of lowering the price on anything no matter how long it sits. After 1997 some buildings just sat and rotted.

In a Western country, if a house or care was taken back for default, the bank would have to mark the asset to market. In other words if they were carrying a car on their books as collateral for 1 million baht but it's was reposessed and it's true value was 700K baht, they'd have to write a loss on their books for 300K baht. Enough of that and the bank runs out of its own capital and is bust. That happened in the US and many banks needed bailout loans.

But Thailand refuses to mark to market or sell at market; both of which would trigger a loss of the bank's own capital. I don't know how they get away with it.

Unlike the West, real estate has very little holding cost for whoever holds the note so there are far fewer forced sales here.

AFAIK at the present time the US has suspended Generally Accepted Accounting Practices for all financial reporting and banks are in fact allowed to value non performing loans as they see fit.

Edited October 2, 2014 by cloudhopper

[Zooheekock]

^ Good point. In any case, the banks all have repo property for sale. I can't speak for their national policies but when I was looking for land a few years ago, the land and houses which the banks were selling were, as far as I could tell, all priced in line with what I saw elsewhere.

Edited October 2, 2014 by Zooheekock

[GAZZPA]

Recession, spiralling household debt, fall in exports, 2 crashed industries (rice and rubber), political instability, problems over safety image, problems with overall image, loss of GSP for exports over many industries, falling investment,,,,

Not looking good right now.

Still, there will be a report tomorrow showing us why everything is fantastic in LOS.

[catweazle]

Thaiand, hub of debt

[HUAHIN62]

_{The evil of the consumer based economic model is indebtness. Economic cycles of fast growth followed by bubbles bursting, do the world leaders have no commonsense. If you don't produce something you are not productive, but in countries like Spain prostitution and illegal drug trade form part of their GDP calculations. A mad mad world we are living in.}

[trogers]

The banks and financial institutions need only to kick their own butts - very low down payments for large ticket items.

[Pundi6446]

Thailand is headed for some very shocking news, the Earth isn't flat

Edited October 2, 2014 by Pundi6446

[retarius]

Securitize these household loans and sell them to Wall Street as triple A rated high yield securities.

[worgeordie]

What happened to all the money the farmers have been paid for their rice,

I could never fathom how Thais could buy new cars,eat out,drinking,iphones,

etc, now I know they are all up to their eyes in debit.its the i want it and i

want it now generation.now the serious question how much of this debit is

secured.why worry its only money,they can sharp print some more.

regards Worgeordie

[Sharchen]

Here's a table of household debt in the US going back to 1947. The US topped-out at 95% in Q1 2009 (financial crisis) and has steadily declined over 5 years to 77% (2003 levels), only rising again in Q1 of this year.

http://www.economagic.com/em-cgi/data.exe/var/togdp-householdsectordebt

Trying to find a country-by-country comparison table for household debt (that goes beyond the wealthiest counties). Here's one for domestic credit that puts TH 14th overall last year. Given the recent spike, TH has undoubtedly moved up a few slots.

http://data.worldbank.org/indicator/FS.AST.DOMS.GD.ZS/countries?order=wbapi_data_value_2013+wbapi_data_value+wbapi_data_value-last&sort=desc

Edited October 2, 2014 by Sharchen

[SPB65]

Tons of locals getting up to their ears in debt in the south. Credit left, right and centre for high-end SUVs and property but their staple income from rubber falling through the floor. It's getting very messy for some. I wonder how many farangs who bought plantation land are starting to regret it as well.

[Sharchen]

Good thing:

Soon a wide range of very cheap houses to choose from, if you have the money and need a house.

Could be, but don't forget that Thais aren't in the habit of lowering the price on anything no matter how long it sits. After 1997 some buildings just sat and rotted.

In a Western country, if a house or care was taken back for default, the bank would have to mark the asset to market. In other words if they were carrying a car on their books as collateral for 1 million baht but it's was reposessed and it's true value was 700K baht, they'd have to write a loss on their books for 300K baht. Enough of that and the bank runs out of its own capital and is bust. That happened in the US and many banks needed bailout loans.

But Thailand refuses to mark to market or sell at market; both of which would trigger a loss of the bank's own capital. I don't know how they get away with it. See the rice scheme and the nearly 1 trillion baht borrowed from the Ag Bank for rice that either doesn't exist or is rotten and no sales have been made. Even if they sold it they paid way above world market value. But they just keep carrying that collateral on their books as it it was there to cover the loans.

I do know they borrowed some money from the IMF after 1997 but I don't know if they paid it back.

All in all I wouldn't put more money in a Thai bank than I needed for next month's expenses.

Thai inflation jumped in 1998 from 5.6% to 8%. I suppose that's one way to mark to market! Then again, inflation plummeted in 1999 to 0.3%, probably because the IMF put the screws to the govt. Inflation was 2.2% last year. My guess is the govt. would let inflation rise if there was a crisis (and no IMF intervention). I noticed the dollar has been creeping up on the baht lately...

[AnotherOneAmerican]

But Thailand refuses to mark to market or sell at market; both of which would trigger a loss of the bank's own capital. I don't know how they get away with it. See the rice scheme and the nearly 1 trillion baht borrowed from the Ag Bank for rice that either doesn't exist or is rotten and no sales have been made. Even if they sold it they paid way above world market value. But they just keep carrying that collateral on their books as it it was there to cover the loans.

They have no option, after the 1997 failure, banks are prohibited by law from selling property below the amount of the outstanding loan.

[trogers]

Here's a table of household debt in the US going back to 1947. The US topped-out at 95% in Q1 2009 (financial crisis) and has steadily declined over 5 years to 77% (2003 levels), only rising again in Q1 of this year.

http://www.economagic.com/em-cgi/data.exe/var/togdp-householdsectordebt

Trying to find a country-by-country comparison table for household debt (that goes beyond the wealthiest counties). Here's one for domestic credit that puts TH 14th overall last year. Given the recent spike, TH has undoubtedly moved up a few slots.

http://data.worldbank.org/indicator/FS.AST.DOMS.GD.ZS/countries?order=wbapi_data_value_2013+wbapi_data_value+wbapi_data_value-last&sort=desc

No doubt Thailand is working hard for the first slot - hub of household debts! Credit cards for farmers and taxi drivers...

[NeverSure]

Good thing:

Soon a wide range of very cheap houses to choose from, if you have the money and need a house.

Could be, but don't forget that Thais aren't in the habit of lowering the price on anything no matter how long it sits. After 1997 some buildings just sat and rotted.

In a Western country, if a house or care was taken back for default, the bank would have to mark the asset to market. In other words if they were carrying a car on their books as collateral for 1 million baht but it's was reposessed and it's true value was 700K baht, they'd have to write a loss on their books for 300K baht. Enough of that and the bank runs out of its own capital and is bust. That happened in the US and many banks needed bailout loans.

But Thailand refuses to mark to market or sell at market; both of which would trigger a loss of the bank's own capital. I don't know how they get away with it.

Unlike the West, real estate has very little holding cost for whoever holds the note so there are far fewer forced sales here.

AFAIK at the present time the US has suspended Generally Accepted Accounting Practices for all financial reporting and banks are in fact allowed to value non performing loans as they see fit.

You missed the point. Cars have little holding cost too. But if the car is repossessed and is worth only 700k baht while the loan is 1 million baht, there is an instant loss of 300k even while the car is being held by the bank. Laws in the West would require the bank to immediately mark the car to market (value) on its books and take a 300k hit.

Even while holding, the books have to accurately reflect the banks position, and that includes accurately stating the value of collateral for loans.

The idea that the US has suspended proper accounting practices is outrageous. The proof is that after the crash in 2007-2008 many banks got bailout loans because the value of real estate dropped and they had to reflect that on their books. That put many of them under water because they didn't have enough of their own capital to take those hits.

Banks are doing well now. Many were bought by other more solvent banks, the economy has improved, real estate values are climbing, and the banks are again making money. Most people who were going to take a loss on a home and lose it have already done so and the inventory of foreclosures for sale is almost gone.

[AnotherOneAmerican]

Banks are doing well now. Many were bought by other more solvent banks, the economy has improved, real estate values are climbing, and the banks are again making money. Most people who were going to take a loss on a home and lose it have already done so and the inventory of foreclosures for sale is almost gone.

Nah, lots of US houses still selling for less that they cost in 1990.