Bangkok’s BAM anticipates drop in bad debt auction prices in 2024

Bangkok Commercial Asset Management (BAM), a prominent player on the Stock Exchange of Thailand (SET), anticipates a decrease in auction prices for bad debt sales in 2024 due to a rising supply amid economic sluggishness. The financial institutions are expected to face increased challenges with the escalation of distressed debts, influenced by depreciating auction prices for both non-performing loans and non-performing assets.

The Chief Executive of BAM, Bundit Anantamongkol, advises banks to approach asset sales judiciously this year, striking a balance between profit-making and writing off bad debt. He predicts that banks will continue to offload their bad debt to asset management companies, though the total amount is likely to diminish following the substantial volume sold last year.

In 2023, the banking industry’s sales of bad assets totalled approximately 170 billion baht (US$4.7 billion), said Bundit.

“However, banks cancelled asset sales worth around 50 billion baht (US$1.39 billion) last year due to lower than anticipated auction prices.”

Given the fragile state of the economy and deteriorating debt repayment capacity among clients, BAM foresees more hurdles in debt collection this year. The company sets its sights on debt collection valued at 20 billion baht (US$559 million) in 2024, aiming to increase it to 23.3 billion baht (US$651 million) by 2026, reported Bangkok Post.

According to BAM’s financial statement, the total debt collection for the first nine months of 2023 amounted to 11.2 billion baht (US$313 million), marking a year-on-year decrease of 2.8%. Notably, the collection of non-performing loans dropped significantly by 12.4%. The total debt collected in 2022 was approximately 17 billion baht (US$475 million).

Pandemic impact

The impact of the pandemic and the economy led to non-performing loans in the banking industry totalling 500 billion baht (US$13.9 billion) in 2023. Special mention loans, which are loans overdue from 30 to 90 days, totalled nearly 1 trillion baht (US$27.9 billion), according to BAM.

Bundit reveals that BAM plans to target bad asset purchases worth 70 billion baht (US$1.9 billion) this year, with 40 billion baht (US$1.1 billion) already in due process and a portion of the amount deferred from last year. As the country’s largest asset management company, BAM has total non-performing loans under management of 474 billion baht (US$13.2 billion) and total non-performing assets under management of 69.8 billion (US$1.9 billion).

Looking ahead to 2024, Bundit states the company intends to boost revenue by expanding three new businesses under its new asset management models. These include clean loan management, the establishment of a consortium for non-performing asset management, and the expansion of the property appraisal service.

In related news, the Thai government’s initiatives to address informal debt and loan sharks raised concerns among experts, with scepticism about their effectiveness in managing household debt.