Thai banks' loans growth seen slowing to 2-3% this year

[BANGKOK] Thai commercial banks could see their lending increase at a slower-than-expected rate of 2-3 per cent this year after rising 4.3 per cent last year due to the slow economic recovery, a senior central bank official said on Thursday.

Southeast Asia's second-largest economy has yet to regain traction since the army seized power in May 2014 to end months of political turmoil. Exports and domestic demand have been stubbornly sluggish amid high household debt levels. "The gradual and uneven economic recovery has kept loan growth low and asset quality deteriorating," Don Nakornthab, senior director at the Bank of Thailand, told a news conference.

In August, the BOT expected loan growth of 3-4 per cent this year.

Bank lending rose 2.4 per cent from a year earlier in the third quarter, its weakest pace in six years, due in part to big corporate loan repayment, and down from 3.3 per cent growth in the second quarter, Mr Don said.

Corporate loans, which accounted for about 68 percent of the total, grew just 1.1 per cent in the third quarter from a year earlier as banks remained cautious about lending due to rising non-performing loans (NPLs), he said.

Banks' NPLs rose to 2.89 per cent of total lending in the third quarter of this year, their highest rate in five years, from 2.72 per cent in the prior quarter, Mr Don said. "This is because economic conditions have not improved much and NPLs are likely to increase further next year, but they should peak next year," he said.

Most of the increased NPLs came from small- and medium-sized businesses, housing loans and credit cards, Don said.

However, banks have already set aside high loan-loss provisions but that will affect their profits, he said.

The central bank said on Wednesday the economy was expected to grow close to the previous forecast of 3.2 per cent this year. Last year's growth was 2.8 per cent..

REUTERS