Perfomance of the Thai Banking System in 2018 · The Thai banking system’s provision remained...
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No. 13/2019 Performance of the Thai Banking System in 2018 Mr. Somchai Lertlarpwasin, Senior Director, Financial Institutions Strategy Department, Bank of Thailand, reported on the Thai banking system’s performance in 2018 that bank loans continued to expand in line with economic growth. Loan quality stabilized partly due to banks’ loan portfolio management. Net profit increased due to higher interest income and lower provisioning expenses. The Thai banking system remained sound with high levels of loan loss provision, capital fund and liquidity to facilitate further credit expansion. Details are as follows. Bank loans expanded from 4.4% last year to 6.0% in line with improved economic conditions. Loan expansion was attributable to consumer loan growth in all portfolios in accordance with strong private consumption, together with corporate loan growth in several businesses, particularly from large corporates and SMEs with large credit line, although some large corporates increased their funding through debt securities. Corporate loan (65.9% of total loans) grew at 4.4%. Large corporate loan (excluding financial business) expanded 4.1% mainly from service sector as a result of an acquisition of foreign hotel group, as well as loan growth in commerce and real estate sectors. SME loan (excluding financial business) grew at 4.5%, particularly from SMEs with large credit line in energy, real estate and construction businesses. Consumer loan (34.1% of total loans) expanded across all portfolios with growth rate increased to 9.4%. This was attributed to (1) continued increase in mortgage lending with growth accelerated during the last quarter of 2018 before the Loan to Value (LTV) measure become effective in April 2019, 2) high auto loan growth consistent with increased car sales after the five- year lock-in period of the first-car buyer scheme ended, and 3) increase in all types of personal loans such as secured home loans, car title loans and welfare loans. On the loan quality front, the ratio of gross non-performing loan (NPLs) to total loans was at 2.93%, close to 2.91% last year. Gross NPLs outstanding stood at 443 billion baht, increasing by 14 billion baht from the previous year which was at slower growth rate since the end of 2016. This reflected stable overall loan quality although it was partly due to trouble-debt restructuring and write-off. The ratio of special mention loans (SMs) to total loans declined from 2.55% last
Transcript of Perfomance of the Thai Banking System in 2018 · The Thai banking system’s provision remained...
No. 13/2019
Performance of the Thai Banking System in 2018
Mr. Somchai Lertlarpwasin, Senior Director, Financial Institutions Strategy Department, Bank of Thailand, reported on the Thai banking system’s performance in 2018 that bank loans continued to expand in line with economic growth. Loan quality stabilized partly due to banks’ loan portfolio management. Net profit increased due to higher interest income and lower provisioning expenses. The Thai banking system remained sound with high levels of loan loss provision, capital fund and liquidity to facilitate further credit expansion. Details are as follows.
Bank loans expanded from 4.4% last year to 6.0% in line with improved economic conditions. Loan expansion was attributable to consumer loan growth in all portfolios in accordance with strong private consumption, together with corporate loan growth in several businesses, particularly from large corporates and SMEs with large credit line, although some large corporates increased their funding through debt securities.
Corporate loan (65.9% of total loans) grew at 4.4%. Large corporate loan (excluding financial business) expanded 4.1% mainly from service sector as a result of an acquisition of foreign hotel group, as well as loan growth in commerce and real estate sectors. SME loan (excluding financial business) grew at 4.5%, particularly from SMEs with large credit line in energy, real estate and construction businesses.
Consumer loan (34.1% of total loans) expanded across all portfolios with growth rate increased to 9.4%. This was attributed to (1) continued increase in mortgage lending with growth accelerated during the last quarter of 2018 before the Loan to Value (LTV) measure become effective in April 2019, 2) high auto loan growth consistent with increased car sales after the five-year lock-in period of the first-car buyer scheme ended, and 3) increase in all types of personal loans such as secured home loans, car title loans and welfare loans.
On the loan quality front, the ratio of gross non-performing loan (NPLs) to total loans was at 2.93%, close to 2.91% last year. Gross NPLs outstanding stood at 443 billion baht, increasing by 14 billion baht from the previous year which was at slower growth rate since the end of 2016. This reflected stable overall loan quality although it was partly due to trouble-debt restructuring and write-off. The ratio of special mention loans (SMs) to total loans declined from 2.55% last
year to 2.42%, with SM outstanding at 366 billion baht. The Thai banking system’s provision remained high at 668 billion baht, increasing by 67 billion baht from last year. As a result, the ratio of actual to regulatory loan loss provision increased to 193.3%.
In 2018, the Thai banking system recorded net profits of 207.2 billion baht, increased 10.8% from last year, thanks to higher interest income from loan expansion and lower provisioning expenses. However, fee income decelerated as fee-free usage of online retail fund transfer increased, and commission-based income from bancassurance and mutual fund businesses declined. Overall, the return on asset (ROA) rose to 1.11% from 1.04% last year, while the ratio of net interest income to average interest-earning assets (Net Interest Margin: NIM) remained stable at 2.73%.
Capital fund of the Thai banking system was at 2,569 billion baht, increased by 117 billion baht from last year, mainly due to appropriation of net profit. As a result, capital adequacy ratio (BIS ratio) and common equity Tier-1 ratio (CET1 ratio) rose to 18.3% and 15.8% respectively.
Bank of Thailand February 15, 2019
For further information, please contact: Financial Performance and Loan Analysis Team Tel: +66 2283 5980 E-mail: FP&[email protected]
Performance of the Thai Banking Systemin 2018
Overall Performance of the Thai Banking System in 2018
2/13
Bank loan continued to expand in line with economic growthwhile overall NPL remained stable partly due to banks’ loan portfolio management.
Net profit increased due to higher interest income and lower provisioning expenses. However, fee income decelerated as fund transfer fee and commission-based income from bancassurance and mutual fund declined.
The Thai banking system remained sound with high levels of loan loss provision, capital fund and liquidity to further support the economy.
Overall financing through bank loans and debt securities increased in line with economic growth.
3/13
Real GDP
Bank loan
Bond
25.121.4 20.9
6.0
12.4
14 15 16 17 18
5.0 4.32.0
4.46.0
14 15 16 17 181.0
3.0 3.3 3.9 4.2*
14 15 16 17 18
Growth rate compared to the same period last year
* Growth forecast from Monetary Policy Report, December 2018
4/13
Total Loan Corporate Loan Large Corporate Loan* SME Loan* Consumer Loan
Bank loans continued to expandfrom both consumer and corporate loans.
5.0 4.3
2.0
4.46.0
14 15 16 17 18
4.9
-0.5 -1.0
0.0
4.1
14 15 16 17 18
4.03.2
0.6
3.6 4.4
14 15 16 17 18
5.6 5.7
1.8
5.7
4.5
14 15 16 17 18
7.4 6.9
4.96.1
9.4
14 15 16 17 18
* Excluding financial business
(23.7%) (33.3%) (34.1%)
A number in parentheses indicates share of total loans
(65.9%)
Growth rate compared to the same period last year
Corporate loan expanded well from large corporates in service, commerce and real estate sectors, as well as SMEs with large credit line in some businesses.
5/13
Manufacturing(16.9%)
Commerce(15.1%)
Services(7.5%)
Real Estate(5.6%)
Construction (1.9%)
Public Utilities(7.3%)
Financial Business(8.9%)
Larg
eSM
Es
-3.3 -2.9 -4.2
13.8
4.9
25.1
-1.2
18.5
0.3
-8.6
5.2
-6.6
1.0 8.1
-20-10
0102030
7.8
0.6 4.1 2.16.8 4.7
10.6 10.02.8
14.3
1.8
13.610.1
1.5
-10
0
10
20
14 15 16 17 18 14 15 16 17 18 14 15 16 17 18 14 15 16 17 18 14 15 16 17 18 14 15 16 17 18 14 15 16 17 18
Growth rate compared to the same period last year
A number in parentheses indicates share of total loans
Consumer loan expanded across all portfolios.
6/13
Housing (17.0%) Auto (8.1%) Credit Card (1.9%) Personal (7.2%)
12.19.3
6.95.5
7.8
14 15 16 17 18
-3.4
0.5 1.4
8.4
14 15 16 17 18
12.68.0
6.4 5.93.4
7.4
14 15 16 17 18
11.19.1
3.85.7
10.1
14 15 16 17 18
Grow
th ra
te co
mpar
ed to
the
same
per
iod la
st ye
ar
A number in parentheses indicates share of total loans
7/13
Total Loan Corporate Loan Large Corporate Loan SME Loan Consumer Loan
2.15
2.552.83 2.91 2.93
2.61
2.38 2.63 2.55 2.42
14 15 16 17 18
2.072.55 2.88 3.01 3.05
2.29 2.03 2.40 2.29 2.12
14 15 16 17 18
1.131.61 1.47
1.75 1.672.19 1.86
2.34
1.85 1.60
14 15 16 17 18
3.11 3.504.35 4.37 4.46
2.40 2.202.47 2.77 2.66
14 15 16 17 18
2.39 2.56 2.71 2.68 2.66
3.50 3.26 3.19 3.21 3.13
14 15 16 17 18
Overall NPL remained stable, whereas NPL of SME loan continued to increase.
%NPL
%SM
NPL of SME loan in several businesses remained high,partly due to structural factors and relatively non-competitive business model.
8/13
Manufacturing Commerce Services Real Estate Construction Public Utilities Financial Business
Larg
eSM
Es
4.76 4.78
2.44 2.802.51
1.84 2.04 1.601.06
1.610.32 0.17 0.11 0.21
012345
5.65 6.27 6.596.63
3.89 3.834.84
4.02
7.49 6.77
1.231.200.05
0.1302468
10
14 15 16 17 18 14 15 16 17 18 14 15 16 17 18 14 15 16 17 18 14 15 16 17 18 14 15 16 17 18 14 15 16 17 18
%NPL
Overall NPL of consumer loan remained stable. However, an increase in NPL of housing and auto loans shoud be monitored.
9/13
2.19 2.442.93 3.23 3.25
1.63 1.68 1.77 1.91 1.77
14 15 16 17 18
3.223.99 3.74
2.61 2.342.14 2.16 2.15 1.93 1.70
14 15 16 17 18
2.44 2.73 2.872.53 2.51
2.57 2.29 2.35 2.36 2.26
14 15 16 17 18
%NPL %SM
2.54 2.311.79 1.60 1.66
8.28 7.80 7.43 7.15 7.11
14 15 16 17 18
Housing Auto Credit Card Personal
Loan loss provision and capital fund remained high.
10/13
Loan loss provision
Capital fund
15.6 15.8
2.6 2.518.2 18.3
02468
10121416182022
2014 2015 2016 2017 2018
CET1 Tier 2 BIS ratio
%
170 149
171.9
193.3
120130140150160170180190200
0
50
100
150
200
250
300
2014 2015 2016 2017 2018
Loan loss provision expense %Actual/Regulatory loan loss provision(RHS)
%Billion Baht
Net profit increased due to higher interest income from loan expansion and lower provisioning expenses, resulting in improved profitability ratios.
11/13
Growth rate of interest income and provisioning expenses
355 394 398
224 187 2071.52.9 1.14.7
-5.8
10.7
-20-1001020
0100200300400500
2014 2015 2016 2017 2018Operating profit Net profit %yoy Operating profit (RHS) %yoy Net profit(RHS)
Billion baht %yoy
Profits
Profitability ratio
2.77 2.73
1.38 1.11
9.517.96
0246810
012345
2014 2015 2016 2017 2018NIM ROA ROE (RHS)
% to asset % to equity
2.5
0.6
3.8
-4.1
17.4
-12.1 -20
0
20
40
60
80
2014 2015 2016 2017 2018-3-2-1012345
Interest income Provision expense (RHS)
%yoy%yoy
7.71
2.76
1.04
Fee income decelerated as fund transfer fee and commission-based income from bancassurance and mutual fund declined.
12/13
- Fee income from fund transfer declined since banks have waived digital transaction fees and hence causing acceleration in online fund transfer transactions.
- Commission-based income from bancassurance and mutual fund declined partly as banks adapted to raise standard on market conduct, coupled with stock market’s volatility.
Structure of fee income
Percentage of total revenues
Fund Transfer Fee 2.2%
Commission Fee 3.9%
52
314 390
33
2220
2.4
1.6
1.6
- 100 200 300 400 500
Q12017
Q2 Q3 Q4 Q12018
Q2 Q3 Q4
Mobile / Internet ATM Branch
MillionsFund transfer transactions by channel
3812
20
10 317
Share of total fee income
Card/ Cheque
Fund transfer
Commission
Loan-relatedSecurity and Consulting
Others69.719.2
11.1
Share of total income
Interest income
Others
Fee income
0.5
-6.6-3.0
2014 2015 2016 2017 2018-10
01020304050
%YoY Fee Income %YoY Fund Transfer%YoY Commission Income
%yoy Growth rate of fee incomeCommission Income in 2018
Bancassurance -1.9%yoy
Securities -4.9%yoy
13/13
LCR and NSFR
180.1 184.2
100
120
140
160
180
200
011223344
2016 2017 2018High-quality Liquid Assets (HQLA)Liquidity Coverage Ratio (LCR) (RHS)
Trillion baht %
Thai banking system has sufficient liquidity to facilitate further credit expansion.
Loan to Deposit Ratio
LCR
129.3 129.4
100
110
120
130
140
0
3
6
9
12
15
18/Q3 18/Q4
Thou
sand
s
Available stable funding
%NSFR
Trillion baht
4.4
6.05.0
3.9
96.398.3
80
85
90
95
100
012345678
2014 2015 2016 2017 2018
Loan Deposit L/D ratio (RHS)
%yoy %Growth rate of loan, deposit and L/D ratio
* Excluding Interbank
