Thai banks face systemic risks amid uneven recovery (S&P)

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Thai banks face higher systemic risks as the economic recovery remains uneven and the Russian-Ukrainian conflict could weigh on the country’s tourism industry, according to S&P Global Ratings.

The long period of weak activity, especially in the tourism sector, has hurt businesses and reduced household incomes in Thailand. Regulatory measures such as easing loan-to-value ratio requirements for mortgages to limit high household indebtedness would delay the resolution of structural problems, Ratings analysts said at an online event on May 23. March.

“We estimate that around 10% to 15% of banking system loans will need to be restructured,”

Deepali Seth-Chhabria, Associate Director of Ratings for Financial Institution Ratings in South and Southeast Asia.

The agency downgraded its ratings on The Siam Commercial Bank PCL and Kasikornbank PCL to BBB from BBB+, and on Krung Thai Bank PCL and TMBThanachart Bank PCL to BBB- from BBB, reflecting Ratings’ view of increased risks systemic among lenders. Meanwhile, the ratings of Bangkok Bank PCL and Bank of Ayudhya PCL were affirmed at BBB+ on March 21. All six banks have a stable outlook, Ratings said.

Banks remain resilient

In response, the country’s central bank said stress tests on bank capital showed Thailand’s banking system remained resilient and able to withstand future risks and uncertainties.

To ensure that financial assistance to debtors does not pose a risk to the financial soundness or stability of banks, the central bank closely monitors the risks, loan quality and financial condition of banks, Ronadol Numnonda, under – Governor, Financial Institutions Stability, Bank of Thailand, said in a March 22 statement.

The number of borrowers under the country’s financial aid package fell to 14% of total loans at the end of 2021, after peaking at 30% in July 2020 during the surge in COVID-19 infections. in Thailand, the central bank official said, adding,

“Since then, it has become clear that debtors who left the financial assistance program have regained their debt service.

Ratings expects the tourism sector to regain its full potential only after 2024, while the Russian-Ukrainian conflict could further delay the normalization of international tourist arrivals.

The non-performing loan ratio remained relatively stable

The banking sector’s reported non-performing loan ratio has remained relatively stable at around 3% due to relief measures, although Ratings expects it to climb to around 5% over the next 24 months.

This news article from S&P Global Market Intelligence may contain information on credit ratings issued by S&P Global Ratings. The descriptions in this news article were not prepared by S&P Global Ratings.

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