Banks put in place measures to minimise lending risks
Thailand’s major financial institutions are preparing for a difficult second half of 2024, as a struggling economy and high household debt force banks to take a more conservative approach to lending.
This comes as the country continues to experience a significant economic slowdown, with lower-than-expected exports and household debt exceeding 90% of gross domestic product (GDP).
In addition, a combination of geopolitical tensions and trade disputes has created a complex operating environment for businesses and consumers alike. The subsequent strain on consumer spending and debt repayment capabilities is exacerbating concerns about the financial health of both borrowers and lenders.
As a result, major banks are implementing stricter lending policies to mitigate risks. This trend, which began in the first half of 2023, is expected to continue through the latter half of 2024.
Kasikorn Bank (KBANK) has announced a more selective approach to lending, focusing on top-tier customers in low-risk categories to mitigate potential loan losses. While maintaining its overall lending target, the bank will closely monitor developments across various sectors.
“Given the increased uncertainty, both locally and globally, banks must continue to monitor various factors. The group to watch out for is the business sector that has not yet recovered,” Kattiya Intaravichai, CEO of KBANK, stated.
Kiatnakin Phatra Bank (KKP) is also adopting a prudent stance, reducing exposure to riskier loan segments such as home loans, car loans, and hire purchase. The bank has tightened lending criteria for mortgage applicants, with a particular focus on those seeking loans exceeding five million baht.
“This year, we are not interested in growth. While some segments have seen growth in the past this is now declining and we need to be more careful. We have therefore adjusted our growth target,” Aphinant Klewpatinond, CEO of KKP, noted.
Bank of Ayudhya (Krungsri) has acknowledged increased risks across its loan portfolio, including the previously resilient large corporate segment. The prolonged economic slowdown and evolving business challenges have dampened the investment appetite of many companies.
“We want to lend, but in this situation, large companies do not invest and there are defaults in both the car business and in real estate. This year will be a year of support,” Prakob Phiencharoen, head of the corporate and investment banking group at Bank of Ayudhya (Krungsri) said.
Siam Commercial Bank (SCB) is prioritising risk management over growth, carefully selecting new customers and closely monitoring existing loan portfolios. The bank is aiming for double-digit return on equity (ROE) by focusing on lower-risk business segments.
“This year, we need to adjust our business strategy, focusing on risks. Today, we have both old customer portfolios and new ones to fill. We must be careful when accepting new customers. As for our existing customers, we must look at how they can survive in this economic environment,” Kris Chantanotoke, SCB CEO emphasised.
Bangkok Bank (BBL) has maintained a cautious approach while supporting businesses with liquidity and investment opportunities. The bank expects to keep bad debt provisions at a high level in the second half of the year.
“The bank believes that the situation is still manageable, but it must be monitored closely. As for setting up a provision for bad debts, the second half of the year is likely to remain at a high level and close to the first half of last year,” Chartsiri Sophonpanich, BBL president said.
This collective tightening of lending practices by Thai banks reflects the financial sector’s response to increasing economic uncertainties and the need to safeguard against potential rises in non-performing loans. As the situation develops, it remains to be seen how these measures will impact Thailand’s broader economic recovery efforts.
