Thai banks weigh up relief packages despite NPL worries
(7 March 2014 – Thailand) Amidst rising economic woes in Thailand, the threat to banks is the fear that non-performing loans (NPLs) for small and medium-sized enterprises (SMEs) will rise.
Maybank Kim Eng quoted Executive Vice President at Kasikornbank (KBANK), Patchara Samalapa, who said the bank has nearly 100 SME customers with a credit line of THB2.7 billion (A$927,000), 40 percent of total loan growth and is calling support for them.
The majority of these customers are farming-related businesses whose cash flows have dried up due to the government's late payment to farmers under the rice pledging scheme.
Maybank Kim Eng noted that the bank projects 10 percent SME loan growth this year.
CIMB Thai Bank (CIMBT) Senior Executive Vice President Jiratchyuth Amyongka said the bank was considering introducing relief packages for its SME customers by extending the grace period for both principle and interest payments as well as providing additional working capital to support liquidity.
Maybank Kim Eng said the statements by Samalapa and Amyongka were largely in line with its view of action.
“We are concerned about a potential chain reaction starting from the struggling SMEs driving up the system’s NPLs by 6 percent this year.
“SMEs are by nature more sensitive to the deteriorating economic situation compared to large corporates,” Maybank Kim Eng said.
“We remain cautious on the bank’s asset quality and already expect rising NPLs for SMEs and retail loans, assuming political situation will improve in mid-2014.
“We forecast a sector NPL ratio of 2.84 percent and credit cost of 0.87 percent to total loans for 2014.”