Thai banks brace for rising credit risk amid global uncertainties

Large local banks foresee their corporate clients grappling with significant challenges in the second half of the year due to global uncertainties and concerns over a potential US recession.

Banks aim to manage asset quality to mitigate rising credit risk among certain customer segments.

The Chief Executive of Siam Commercial Bank (SCB), Kris Chantanotoke, highlighted that some corporate customers will face heightened operational difficulties later this year, driven by both internal and external risk factors.

Several industries within the country are experiencing reduced demand, which coincides with slower economic growth.

Globally, various business sectors are expected to be impacted by economic uncertainties, geopolitical risks, and apprehensions about a possible US recession.

The credit risk for some corporate clients is anticipated to increase, according to Kris. SCB intends to adopt a more cautious and selective strategy for loan growth to preserve asset quality.

Despite the challenges, Kris noted that the bank’s corporate clientele remains robust and is well-equipped to deal with these uncertainties.

Although some industries have shown stagnant growth, SCB expects positive corporate loan growth this year. SCB, Thailand’s fourth-largest lender by total assets, has set a modest loan growth target for 2024 and reported slight growth in the first half of the year, said Kris.

“In our loan portfolio, some segments contracted in the first half of this year, such as auto loans and certain mortgage segments. For mortgages, the bank is primarily focusing on houses priced between 5 million and 7 million baht per unit.”

Rising uncertainties

The President of Bangkok Bank (BBL), Chartsiri Sophonpanich, mentioned that the bank will focus on supporting its customers amid rising uncertainties in both local and global economies.

In response to increasing challenges related to asset quality, the bank plans to boost its provisions for expected credit losses in the second half of the year, while meticulously managing costs and adjusting interest rates appropriately for customers.

Despite achieving a marginal loan growth of 1.8% in the first half, Chartsiri said BBL will maintain its existing loan growth target of 3-5% for the entire year.

The Chief Executive of Kasikornbank (KBank), Kattiya Indaravijaya, indicated that the bank will continue to carefully expand its corporate loan portfolio in the second half of the year due to heightened global and local uncertainties.

While large corporations remain a central focus for the bank’s lending growth this year, KBank will remain selective in approving loans.

The bank will prioritise top-tier companies within industries that exhibit strong financial conditions to manage asset quality amid increasing business challenges, she said.

As of June, the six domestic systemically important banks reported a combined loan portfolio of 13.49 trillion baht, a slight decrease of 0.14% from 13.51 trillion in December last year. These banks forecast total loan growth in the range of 3-5% for 2024, reported Bangkok Post.