Bangkok: The Bank of Thailand (BOT) has reported a contraction in commercial banking loans by 1.3% in the first quarter of 2025, with a notable increase in non-performing loans (NPLs) amounting to 548.1 billion baht, primarily from SME and housing loans. Despite these challenges, the BOT assured that the commercial banking system remains stable and secure, underpinned by robust levels of capital, reserves, and liquidity.
According to Thai News Agency, Ms. Suwannee Jesadasakdi, Assistant Governor of the Financial Institutions Supervision Group at BOT, attributed the contraction in loans to high debt repayments. Large corporate loans continued to grow, whereas SME and consumer loans saw a downturn, reflecting high credit risk in these segments. The NPLs ratio increased to 2.90%, largely driven by SME and housing loans. Additionally, credit card and hire purchase loans experienced a rise in NPL ratios due to a shrinking loan base. Although stage 2 loans decreased due to substantial repayments from large corporations, the stage 2 ratio held steady at 6.97%. Despite these developments, commercial banks have been proactive in assisting debtors and managing debt quality, with operating results showing improvement from the previous quarter, mainly owing to reduced operating expenses and increased non-interest income.
The BOT emphasized the necessity of monitoring the financial health of business and household sectors, particularly vulnerable groups with slow income recovery and high debt loads. It highlighted the potential pressures from global trade policies and the importance of monitoring the 'You Fight, We Help' initiative. The household debt to GDP ratio saw a decline in Q4 2024 due to the slowed growth of household loans, while the business sector's debt to GDP ratio also decreased due to increased borrowing through the bond market. Although overall profitability remained stable compared to the same period last year, it decelerated from the previous quarter. This trend was supported by the tourism service sector and manufacturing, while the construction and real estate sectors faced challenges from a slowdown in housing demand.