The TBA expects bad loans to keep rising and says banks may need to set aside additional reserves for credit losses.
Call to boost reserves as virus adds pressure
The Thai Bankers’ Association (TBA) expects non-performing loans (NPLs) to keep rising and says banks may need to set aside additional reserves for credit losses this year.
Although Thailand has managed to contain the coronavirus outbreak, other countries outside of China have reported a spike in cases, dampening economic activity worldwide, said TBA chairman Predee Daochai.
The likely result is that local business income and debt-servicing ability will deteriorate, Mr Predee said.
The scale of the epidemics is greater than expected and will pressure the banking sector’s asset quality, he said, even with the collaboration between the Bank of Thailand and the TBA to restructure debt and alleviate the impact on affected customers.
“It makes sense to see higher NPLs and loan-loss provision this year despite the implementation of debt restructuring,” Mr Predee said.
The central bank is letting banks offer a grace period for principal repayment of up to 24 months to those hit by the country’s flagging economy and the virus outbreak.
Mr Predee, also a co-president of Kasikornbank, said KBank may review its 2020 business plan after the National Economic and Social Development Council downgraded the country’s economic outlook for the year.
Several research houses have also cut their economic growth forecasts for 2020, and Kasikorn Research Center (K-Research) could follow suit.
Bangkok Bank senior executive vicepresident Chansak Fuangfu said clients across industries, in particular small and medium-sized enterprises and tourism operators, have applied for debt restructuring.
The bank is providing several debt restructuring options on a case-bycase basis.
“With the difficult economic situation, NPLs could increase,” Mr Chansak said. “But the bank expects to control bad loans as planned, thanks to debt restructuring. There’s no need for us to add provisions for loan losses this year, because of a solid buffer now.”
Bangkok Bank’s coverage ratio is about 180%, he said.
K-Research executive chairman Charl Kengchon said the research house is likely to slash its economic growth forecast for 2020 to less than 2% from the current 2.7%.
K-Research foresees the impact of the virus outbreak on Thai tourism lasting through September before activity picks up in the final quarter, so a contraction in full-year foreign arrivals is likely.
K-Research analysts will monitor the progress of budget disbursement after
‘‘ It makes sense to see higher NPLs and loan-loss provision this year despite the implementation of debt restructuring. PREDEE DAOCHAI Chairman, Thai Bankers’ Association
the delayed fiscal 2020 budget came into force.
Mr Charl said the Bank of Thailand’s Monetary Policy Committee is expected to lower the policy rate further at the March 25 meeting after the US Federal Reserve’s emergency rate cut of 50 basis points on Tuesday.
But it’s unnecessary for the ratesetters to hold an emergency meeting because Thailand doesn’t face an emergency situation from the epidemic, he said, noting that the country has had no significant increase in infected patients so far.