Thai banks see 0.71% loan growth as SMEs and households struggle
Thailand’s top six banks reported a meagre loan growth of 0.71% in the first three quarters of 2023, as compared to the same period in 2022. This slowdown is primarily due to reduced loan uptake by small and medium-sized businesses (SMEs) and an increase in household debt.
The six banks—Bangkok Bank (BBL), Kasikornbank (KBank), Krungthai Bank (KTB), Siam Commercial Bank (SCB), Bank of Ayudhya (Krungsri), and TMBThanachart Bank (ttb)—recorded a combined loan portfolio of 13.6 trillion baht (US$376,428,960,000) from January to September.
Among these, SCB X, an affiliate of SCB, topped the list with a loan growth of 4.4%. On the other hand, KBank and ttb reported a contraction in their numbers of 2.29% and 0.98%, respectively.
Krungsri, in its report to the Stock Exchange of Thailand (SET), attributed the increase of 67.4 billion baht in loans over the nine months mainly to SME and retail loans from its overseas subsidiaries in the second quarter. The bank’s SME loans saw a growth of 10% during this period.
BBL, Thailand’s largest lender by total assets, cited an increase in corporate loans and those made through its international networks as the principal drivers behind its nine-month loan growth, reported Bangkok Post.
KTB reported a 1.4% loan growth during this period, driven by a 5.5% increase in government loans, even as SME loans dropped by 7.4%. KBank, meanwhile, attributed the contraction in its loans to tighter lending criteria and proactive asset quality management in the face of a global economic slowdown.
Financial stability report
The Bank of Thailand, in its financial stability report for the third quarter of 2023, highlighted the fragile financial conditions of SMEs. Many had to repay significant borrowings taken during the pandemic peak. The report also pointed out that SMEs in the trade and manufacturing sectors were under strain due to the global economic slowdown and muted demand from international trading partners.
The central bank also underscored its focus on monitoring debt repayments among households, particularly the vulnerable segment that primarily borrows from specialised financial institutions and non-banks.
Thanyalak Vacharachaisurapol, Deputy Managing Director at Kasikorn Research Centre, stated that the centre had to revise its loan growth forecast for the year from 4-5% down to 2% due to the marginal gains made in the first three quarters.
She attributed this sluggish growth in SME loans to a shaky business environment amidst an uneven Thai economic recovery. However, she expressed confidence that the banking sector would be able to keep non-performing loans in check in the fourth quarter, thanks to robust risk management measures.
