Fitch: Thai Banks# Asset Quality Stabilising in Line with Expectations

Stocks and Financial Services Press Releases Wednesday August 1, 2018 15:09
Bangkok--1 Aug--Fitch Ratings

The 1H18 results for listed Thai banks show that the asset-quality cycle has started to stabilise, with positive impact on banks' profitability and buffers. The trend is in line with Fitch Ratings' expectations (see Fitch: Thai Banks' Asset Quality Deterioration to Ease in 2018, published 28 January 2018), and is consistent with our revision of the banking sector outlook for 2018 to stable last November. The outlook had been negative since 2014.

The average impaired-loan ratio of the listed banks was 3.71% at end-June 2018, virtually unchanged from 3.73% as of end-December 2017. Fitch expects the ratio to be stable for the rest of the year due to more benign economic conditions and tighter underwriting standards among commercial banks. Credit growth remains relatively low, with gross loans up by 3.4% so far this year, although some segments, such as auto loans, are picking up. Auto-loan growth is driven by strong car sales growth of 19.3% in 1H18.

Average profitability improved slightly, with return on assets of 1.35% in 1H18 compared with 1.30% in 1H17. This was driven by lower credit costs, which was evident in the decline in loan-impairment charges/pre-impairment operating profit to 36.0% in 1H18 from 39.6% in 1H17. Fitch expects the ratio to remain under control over the course of 2018. The improved business environment mitigated the flat growth in net fee income, which was hurt by intensifying competition and fee waivers for digital banking that began in March 2018. There appears to be downside risk building in some portions of the property sector, but overall property price indices have remained resilient in the last few years and the central bank has room to implement further macro-prudential measures if required.

Listed banks in Thailand continued to report sound loss-absorption buffers. The average loan-loss allowance/impaired loans was 143% (up from 140% at end-2017), and the common equity Tier 1 capital ratio was between 12% and 19%, well above regulatory requirements. Fitch expects Thai banks to continue to maintain excess buffers that would support their ratings in the event of unexpected losses during an economic slowdown.

Latest Press Release

Gavin Bambury named OANDA(R) CEO

A global leader in online multi-asset trading services and currency data and analytics, OANDA Global Corporation is pleased to announce the appointment of industry leader Gavin Bambury as Chief Executive Officer, effective Monday 26 August 2019. Based in...

Thailand Focus 2019 showcases new governments policies to reinforce confidence

The Stock Exchange of Thailand (SET) will hold the annual flagship inbound roadshow "Thailand Focus 2019: Embracing Opportunities - The Next Chapter", during August 28 – 30, 2019 in Bangkok, marking the first conference for the new government to...

SCB joins with Intelspire to help SMEs increase people management efficiency with Timemint, an advanced digital platform powered by SCB Payroll

Siam Commercial Bank (SCB) continues to expand its digital partnerships to help increase efficiency. Recently, the bank joined hands with Intelspire Co., Ltd., a Thai startup and developer of the Timemint Application, a digital platform used for people...

TMB Appoints New Chief Retail Banking Officer (CRBO)

TMB has appointed Mrs. Marie Ramlie as Chief Retail Banking Officer, effective from August 1, 2019. Marie succeeds Roel Huisman who has completed his tenure with TMB on July 31, 2019. Marie has joined TMB as Head of Retail Products since 2013. She was...

Bankruptcy Court dismisses rehab petition against GL, removes automatic stay, and finds GL is not insolvent

The Central Bankruptcy Court has dismissed the rehabilitation petition submitted by JTA against GL as the Court ruled that GL is not insolvent and that JTA's claims have not proven to be true Previously, on August 15, the Central Bankruptcy Court for the...

Related Topics