Performance of the Thai Banking System in 2021

2022-07-19 16:00:09

Thai banking system remained resilient with high levels of capital fund, loan loss provision and liquidity

Ms. Suwannee Jatsadasak, Senior Director, Bank of Thailand, reported on the Thai banking system’s performance in 2021 that the Thai banking system remained resilient with high levels of capital fund, loan loss provision and liquidity, which served as key mechanism to support economic recovery. Overall asset quality remained relatively stable from the previous year. Meanwhile, the banking system’s profitability improved from the previous year but remained below pre-pandemic level. Details are as follows:

The Thai banking system’s capital fund stood at 3,039.1 billion baht, equivalent to capital adequacy ratio (BIS ratio) of 19.9%. Loan loss provision remained high at 889.8 billion baht with NPL coverage ratio of 162.6%. Liquidity coverage ratio (LCR) registered at 189.2%.

Overall bank loan growth in 2021 was 6.5% year-on-year, edging up from 5.1% in the previous year. Details on bank loans are as follows:

Corporate loans grew by 7.9% year-on-year, with large corporate loan expanding in almost all sectors, reflecting the financing needs of businesses in line with economic recovery. Loans to the government also continued to increase. Meanwhile, SMEs loan continued to expand owing primarily to the rehabilitation credit scheme.

Consumer loans grew by 4.0% year-on-year, around the same pace as the previous year. Credit card loan rose along with the gradual recovery of economic activities. Personal loan continued to grow due to households’ liquidity needs. Auto loan remained stable consistent with domestic car sales which have not yet recovered. Meanwhile, mortgage loan increased at a slower rate in line with a decline in housing demand from the previous year.

The overall loan quality in 2021 remained relatively stable from the previous year due primarily to debt restructuring and financial assistance measures. The gross non-performing loans (NPL or stage 3) increased slightly to 530.7 billion baht, equivalent to the NPL ratio of 2.98%. Meanwhile, the ratio of loans with significant increase in credit risk (SICR or stage 2) to total loans stood at 6.39%, decreasing from 6.62% in the previous year.

The banking system recorded a net profit of 181.0 billion baht in 2021, increasing from the previous year by 23.6%. This was due mainly to lower provisioning expenses as banks set aside an elevated level of provision in the previous year, together with banks’ operating cost control. As a result, the return on asset ratio (ROA) increased to 0.81% from 0.69% in the previous year. Meanwhile, net interest income slightly decreased in line with the policy rate, financial assistance measures and lower interest rate ceilings; thereby, the ratio of net interest income to average interest-earning assets (Net Interest Margin: NIM) decreased to 2.46% from 2.63% in the previous year.