performance of the thai banking system in 2020
TRANSCRIPT
No. 10/2021
Performance of the Thai Banking System in 2020
Ms. Suwannee Jatsadasak, Senior Director, Bank of Thailand, reported on the Thai banking system’ s performance in 2020 that the Thai banking system remained resilient with high levels of capital fund, loan loss provision and liquidity to support economic recovery from the COVID-19 pandemic. Credit assistance measures, coupled with revisions to rules on loan classification and provisioning supported bank loan expansion and alleviated the deterioration of bank loan quality. Meanwhile, banking system’s profitability declined as banks continued to set aside loan loss provision at a high level as a cushion against a potential adverse impact of COVID-19 on loan quality. Details are as follows:
Capital Fund of the Thai banking system was at 2,994. 3 billion baht, equivalent to capital adequacy ratio (BIS ratio) of 20.1%. Loan loss provision remained high at 799.1 billion baht with NPL coverage ratio of 149.2%. Liquidity coverage ratio (LCR) registered at 179.6%.
In 2020, banks’ overall loan growth was 5.1% year-on-year, edging up from 2.0% in 2019. Details on bank loan are as follows:
Corporate loan (64. 2% of total loan) expanded at 5. 4% year-on- year, following a contraction of 0. 8% in the previous year. This was mainly driven by an expansion in large corporate loan, where some large corporates switched their funding source from bond issuance to bank loan in the second quarter of 2020. Meanwhile, SME loan1 contracted at a lower rate, assisted by the soft loan scheme.
Consumer loan (35. 8% of total loan) grew at a slower pace at 4. 6% year-on- year, compared to an expansion of 7. 5% in the previous year, which was consistent with weak household purchasing power due to COVID- 19. However, consumer loan growth improved across all portfolios in the second half of 2020 following an improvement in economic activity after the relaxation of lockdown measures. In particular, mortgage lending expanded in line with an increase in demand for low- rise residential properties and developers’ marketing campaigns.
1 Corporates with a maximum credit line of 500 million baht with a bank as of December 2020.
On the loan quality front, debtors affected by COVID-19 continued to receive credit assistance from banks. As a result, the gross non-performing loan (NPL or stage 3) outstanding slightly increased to 523. 3 billion baht, equivalent to NPL ratio of 3. 12%. Meanwhile, the ratio of loans with significant increase in credit risk (SICR or stage 2) to total loans stood at 6.62%.
The banking system recorded net profit of 146. 2 billion baht in 2020, a decline from the previous year. This was attributed to a high level of provisioning expenses to cushion against a potential impact of COVID-19 on loan quality going forward, combined with a high base effect from the recognition of extraordinary items from gains on sales of investments in 2019. As a result, the ratio of return on asset (ROA) declined from 1.39% in the previous year to 0. 65%. The ratio of net interest income to average interest-earning assets (Net Interest Margin: NIM) decreased from 2.73% to 2.51%.
Bank of Thailand February 22, 2021
For further information, please contact: Banking Risk Assessment Division Tel: +66 2283 5980 E-mail: [email protected]
Performance of the Thai Banking System
in 202022 February 2021
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Overall Performance of the Thai banking system in 2020
The Thai banking system remained resilient with high levels of capital fund, loan loss provision and liquidity.
Bank loan expanded at a higher rate, mainly from large corporates. Meanwhile, SME loan contracted at a lower rate assisted by the soft loan scheme.
Overall consumer loan grew at a slower pace, in line with weak household purchasing power due to COVID-19.
Gross non-performing loan (NPL or stage 3) slightly increased. Debtors affected by COVID-19 continued to receive credit assistance from banks.
Banking system’s profitability declined due to a high level of provisioning expenses as a cushion against potential deterioration in loan quality due to COVID-19.
Bankresilience
ProfitabilityLoan growth
Loan quality
3 / 11
20.1% 149.2% 179.6% 92.3%
Capital fund increased fromprofit appropriation andissuance of perpetualAdditional Tier 1 capitalsecurities.
Banks set aside a high level of provision to cushion against potential deterioration in loan quality from COVID-19.
All banks have LCR above the minimum requirement of 100%.
Deposit grew mainly from savings by retail depositors and businesses.
Capital fund continually increased.
Loan loss provision remained high.
LCR remained high. L/D ratio decreased.
The Thai banking system’s capital fund, loan loss provision and liquidityremained at high levels.
Capital fund(BIS ratio)
Loan loss provision to NPL(NPL coverage ratio)
Liquidity Coverage Ratio(LCR)
Loan to deposit ratio(L/D ratio)
Note: Definition of NPL coverage ratio was revised in accordance to TFRS 9: before Q1/2020 : Loan loss provision (principle only) / NPL outstanding (principle only)after Q1/2020 : Loan loss provision (loan principle + accrued interest + contingent liability) / NPL outstanding (principle + accrued interest).
4 / 11
Bank loan expanded as large corporates switched their funding source from corporate bond issuance to bank financing.
4.2 4.46.0
4.26.0
12.4
2.3 2.0
9.6
-2.1
4.1
7.7
-12.1
5.0 4.5
-6.4
4.6 7.5
-4.2
5.1 3.8
Real GDP Bank loan Bond
2017 2018 2019 20Q1 20Q2 20Q3 20Q4
Note: Growth rate compared to the same period last year.
%yoy %yoy %yoy
5 / 11
4.4
6.0
2.0
4.15.0 4.6
5.1
01234567
17 18 19 Q1 Q2 Q3 Q4
20
Total loan
Bank loan expanded at a higher rate mainly from large corporates,SME loan contracted at a lower rate assisted by the soft loan scheme,
whereas consumer loan grew at a slower pace.
Bank loan expanded at a higher rate mainly from corporate loan.
Corporate loan increased at a higher rate, while consumer loan grew at a
slower pace.
Loan to large corporates increased, due partly to funding switch from bond
issuance to bank loan, while SME loan improved helped by
the soft loan scheme.
3.6 4.4
-0.8
3.3
5.1
4.5
5.46.1
9.4
7.55.6
4.84.8
4.6
-202468
10
17 18 19 Q1 Q2 Q3 Q4
20Corporate Consumer
-1.6 -1.1-5.1
-4.6 -3.3 -2.8 -2.8
8.3 9.8
0.7
7.913.0
10.613.1
-5.4 -5.7 -5.9 -10
-5
0
5
10
15
17 18 19 Q1 Q2 Q3 Q4
20Credit line ≤500 MB* Credit line >500 MB*
(35.8%)
(64.2%)
(22.9%)
(32.3%)
excluding soft loan
%yoy %yoy %yoy
Bank loan growth Loan growth classified by loan portfolios Corporate loan growth classified by size
Note: Growth rate compared to the same period last year | Corporates with a credit line with a bank (excluding financial business) | A number in parentheses indicates share of total loans.
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Overall consumer loan grew at a slower pace in line with weak household purchasing power during the COVID-19 outbreak.
Mortgage loan expanded in line with animprovement in demand for low-rise properties coupled with developers’ marketing campaigns.
Credit card loan contracted following a decline in economic activities.
Auto and personal loans grew at slower rates consistent with a contraction in domestic car sales and weak household purchasing power.
6.1
9.47.5
5.6 4.8 4.8 4.6
0
4
8
12
17 18 19 Q1 Q2 Q3 Q4
20Consumer loan
5.57.8
5.43.4 4.4 5.4 5.9
-30
0
30
60
-5
0
5
10
17 18 19 Q1 Q2 Q3 Q4
20Residential unit transfer in Bangkokand vicinity [RHS]Residential transfer value in Bangkokand vicinity [RHS]
8.412.6
7.6 6.1 4.1 3.5 2.4
-60
-30
0
30
60
-15
-5
5
15
17 18 19 Q1 Q2 Q3 Q4
20Domestic car sales [RHS]
3.47.4 10.1
2.0-0.7 1.0
-2.1
-30-1501530
-10-505
10
17 18 19 Q1 Q2 Q3 Q4
20
Value of credit card usage [RHS]
5.710.1 11.8 10.9 7.8 5.6 6.2
-15
0
15
30
-10
0
10
20
17 18 19 Q1 Q2 Q3 Q4
20Private Consumption Index [RHS]
%yoy%yoy
%yoy
%yoy %yoy %yoy
%yoy
Consumer loan growth Mortgage (17.6%) Auto (8.3%)
Credit card (1.9%) Personal (7.9%)
Note: Growth rate compared to the same period last year | A number in parentheses indicates share of total loans.
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5.99 6.24 6.22 6.53 6.21 6.52 6.84
2.06 1.86 2.08 2.13 2.51 2.61 2.58
0
2
4
6
8
17 18 19 Q1 Q2 Q3 Q4
20
Credit line ≤500 MB Credit line >500 MB
Overall NPL slightly increased. Meanwhile, debtors affected by COVID-19 continued to receive credit assistance from commercial banks.
2.91 2.94 2.98 3.04 3.09 3.14 3.12
2.55 2.42 2.79
7.69 7.49 7.03 6.62
0
4
8
12
17 18 19 Q1 Q2 Q3 Q4
20
Stage 3 (NPL) Stage 2* (from Jan 20)
%
3.01 3.05 3.01 2.97 3.07 3.24 3.23
2.68 2.67 2.903.23 3.12 2.91 2.84
0
2
4
6
17 18 19 Q1 Q2 Q3 Q4
20
Corporate Consumer
% %
*According to the new accounting regulations (TFRS9), stage 2 is defined as loans with significant increase in credit risk (SICR), having a wider coverage than SM.
Stage 3 classified by loan portfolios Stage 3 of corporate loan classified by sizeStage 3 (NPL) and Stage 2 of total loan
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Asset quality deterioration was gradual in all consumer loan types, partly helped by debt restructuring.
Mortgage Auto
Credit card Personal
Banks continued to extend their support to customers affected by COVID-19 and manage their loan quality especially through debt restructuring.
%
%
%
%
3.23 3.25 3.71 4.04 4.04 3.88 3.781.91 1.77 1.89
6.65 6.03 5.66 5.81
0
5
10
15
17 18 19 20Q1
20Q2
20Q3
20Q4
Stage 3 Stage 2* (from Jan 20)
1.60 1.66 1.86 2.09 1.88 1.58 1.44
7.15 7.11 7.439.65 9.62 9.18 9.51
0
5
10
15
17 18 19 20Q1
20Q2
20Q3
20Q4
Stage 3 Stage 2* (from Jan 20)
2.61 2.34 2.41 3.50 3.00 2.42 2.381.93 1.70 1.97
8.547.60 8.96
6.52
0
5
10
15
17 18 19 20Q1
20Q2
20Q3
20Q4
Stage 3 Stage 2* (from Jan 20)
2.53 2.53 2.33 2.61 2.45 2.262.352.36 2.26 2.30
6.53 6.03 6.036.17
0
5
10
15
17 18 19 20Q1
20Q2
20Q3
20Q4
Stage 3 Stage 2* (from Jan 20)
*According to the new accounting regulations (TFRS9), stage 2 is defined as loans with significant increase in credit risk (SICR), having a wider coverage than SM.
9 / 11
Net profit in 2020 declined as banks set aside a high level of provisioning expensesto cushion against a potential economic impact of COVID-19.
Note: Numbers in parentheses represent year-on-year growth rate after adjusting for extraordinary items from gains on sale of investment in 2019 and dividend between commercial banks which were in the process of consolidation in Q1/2020.
NIM
ROA
ROE
Operating profit
500406
19 20 Q1 Q2 Q3 Q4
Billionbaht
Net profit
Provisioning expenses
2.73%
1.39%
9.90%
2.51%
0.65%
4.20%
2019 2020
Profitability ratios25.7% -18.8%%yoy
%yoy
130 110 90 76
163231
271
146
9.4% 41.8%
30.7% -46.0%%yoy
(-3.7%)
(-33.5%)
20
19 20 Q1 Q2 Q3 Q4
49 72 59 51
20
70 32 27 17
19 20 Q1 Q2 Q3 Q420
Billionbaht
Billionbaht
10 / 11
Development in soft loan scheme and credit assistance from financial institutions.
Soft loan scheme from the BOT (as of 8 Feb 2021)
*Businesses affected by COVID-19 with a significant decline in revenue include condominiums, hotel, tourisim-related, passenger transport, textiles and apparel, retail spaces, trade, restaurant, construction, food and beverage as well as automotive and parts.
Businesses significantly affected by COVID-19*
83,410 MB49,922 debtors
Other businesses
42,367 MB24,780 debtors
Soft loan approval125,777 MB
Number of debtors under
soft loan scheme
74,702 debtors
Credit assistance through debt restructuring
Financial institutions’ loan under assistance
Number of accounts under assistance (Million accounts)
4,656 5,117
6,884 7,195 6,897 6,6566,038 5,669
4,835
0
2,000
4,000
6,000
8,000
10,000
Apr May Jun Jul Aug Sep Oct Nov Dec
Billion Baht
Corporate SMEs Retail consumer Total loan under relief measures
2020
July 2020 December 2020
Total 12.52 8.37
Large corporates 0.03 0.03
SMEs 1.17 0.93
Retail consumers 11.31 7.41
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Key takeaways
1Thai banking system remained resilient with high levels
of loan loss provision, capital fund, and liquidity to support economic recovery from the COVID-19
pandemic.
2Banks continued to provide credit assistance to customers affected by COVID-19, which helped alleviate loan quality
deterioration. Meanwhile, banks are encouraged to expedite proactive debt restructuring.