Rising bad debts to continue affecting banking, Fitch says

By WICHIT CHAITRONG 
THE NATION

 

THE OUTLOOK of the Thai banking sector remains “negative” as bad debts will continue to rise, says Fitch Ratings. “Non-performing loans are expected to peak by the end of this year or early next year,” Parson Singha, Fitch Ratings Thailand’s senior director, said yesterday.

 

Given slow economic growth, expected at 3-3.5 per cent this year, bank performance has come under pressure, he said at a forum titled “Global Market Outlook and Thai Bank Sector Landscape in 2017”.

 

Gross non-performing loans (NPLs) at the end of last year were worth Bt385.7 billion or 2.83 per cent of total lending, largely because of loans to small and medium-sized enterprises turning into bad debts, according to Bank of Thailand data.

 

Parson said he projected that the overall NPL rate would exceed 3 per cent this year. However, he did not think this would become a serious issue as banks had taken precautions on new lending.

 

Loan growth will be around 5-8 per cent, not much change from 5 per cent last year, he said.

 

Bank profits may have come under pressure but lenders still have capacity to make profits, he added.

 

Banks have been investing a lot in information-technology systems and preparing for a new regulatory scheme that should help them seek revenue in the medium and long terms.

 

Meanwhile, the impact of competition from financial technology remains to be seen, he said.

 

The outlook for the overall banking industry remains “negative” for the third consecutive year, he said.

 

“It will be harder for the industry credit outlook to turn to ‘positive’ and it will largely depend on the economic environment going forward,” he added.

 

Meanwhile, Kobsithi Silpa-chai, head of capital-markets research at Kasikornbank, said sluggish domestic demand and the low level of private investment had been preventing the economy from taking off. 

 

Thailand is in transition as political and economic reforms have not yet delivered, he said.

 

“The challenge for the government is how to convince investors that its economic reforms such as ‘Thailand 4.0’ will continue regardless of administrative change,” Kobsithi said.

 

He was not optimistic, as the government has not made much progress in the implementation of its investment plans. The government has not yet invested in water management to prevent a flooding disaster like the one in 2011 from happening again, he said.

 

He expects that the government still wants a weak baht to support the export sector.

 

The BOT is not likely to increase its policy interest rate, currently at 1.50 per cent, |this year as there is no inflationary pressure. There is also no pressure coming from the US Federal Reserve, as it has signalled that its rate increases will be gradual. 

 

Moreover Thailand has a large current-account surplus, 12 per cent of gross domestic product, which could cushion external shocks should they happen, he added.

 

Source: http://www.nationmultimedia.com/news/business/EconomyAndTourism/30310207

 

 

-- © Copyright The Nation 2017-03-25

7 hours ago, rooster59 said:

THE OUTLOOK of the Thai banking sector remains “negative” as bad debts will continue to rise, says Fitch Ratings. “Non-performing loans are expected to peak by the end of this year or early next year,

As I stand here by the side of the road and watch one new vehicle after another go by with the 4 door trucks being the preferred vehicle of choice I would think that the peak of Mount Fuji would be closer than a peak in the debt cycle. My definition of a cycle especially this one is your in for the ride of your life. 

12 hours ago, rooster59 said:

He expects that the government still wants a weak baht to support the export sector.

BOT is not likely to increase its policy interest rate, currently at 1.50 per cent, |this year as there is no inflationary pressure.

So no support for increased exports because there is no inflationary pressure? In this case more inflation might be welcomed as increased exports would put more money into Thailand's economic system. In turn inflation would put pressure on increased wages that would increase domestic consumption.