Thai bad-loan ratio set to peak

BANGKOK: Non-performing loans (NPLs) at Thailand’s banks are set to peak towards the end of this year, according to Fitch Ratings, an outlook that may sooth investor sentiment in one of Asia’s worst-performing stock markets this year.

Thai economic growth was subdued but relatively stable at about three per cent, signalling a slower expansion in bad loans in the months ahead and an eventual peak by year’s end or just after, said Parson Singha, senior director for financial institutions at Fitch Ratings, here.

“It depends a lot on how the economic cycle goes,” said Parson on Monday.

Gross NPLs at commercial banks climbed to 2.94 per cent of total loans in the first quarter, Bank of Thailand data showed. That’s the highest level since 2011, underscoring challenges for lenders from a lacklustre economy and elevated household debt. For now, Fitch continued to have a negative outlook on the country’s banking sector, said Parson.

The banking sector has a combined market value of roughly 2.2 trillion baht (RM278 billion), or 14 per cent of the SET Index’s total stock market value.

Rising bad loans risk denting investor sentiment. The SET index has advanced 2.3 per cent this year, the least after China among major Asian stock markets.

The Thai government’s plan to accelerate major infrastructure projects could bolster investor confidence by increasing demand for new loans and so help to lower the bad-debt ratio, said Prapas Tonpibulsak, chief investment officer at Talis Asset Management Co, here. Bloomberg