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Performance of the Thai Banking System in 2020

22 February 2021 (Readers 176)

The Thai banking system has remained resilient, with high levels of capital fund, loan loss provision, and liquidity to support economic recovery from the COVID-19 pandemic.

Ms. Suwannee Jatsadasak, Senior Director of the Bank of Thailand, on 22 February 2021 reported on the Thai banking systems performance in 2020.

According to the report, credit assistance measures, coupled with revisions to rules on loan classification and provisioning, supported bank loan expansion and alleviated the deterioration of bank loan quality.

Meanwhile, banking systems profitability declined as banks continued to set aside loan loss provision at a high level as a cushion against a potential adverse impact of COVID-19 on loan quality.

The Capital Fund of the Thai banking system was at 2,994.3 billion baht, equivalent to capital adequacy ratio (BIS ratio) of 20.1%. Loan loss provision remained high at 799.1 billion baht with NPL coverage ratio of 149.2%. Liquidity coverage ratio (LCR) registered at 179.6%.

In 2020, banks overall loan growth was 5.1% year-on-year, edging up from 2.0% in 2019. On the loan quality front, debtors affected by COVID-19 continued to receive credit assistance from banks. As a result, the gross non-performing loan (NPL or stage 3) outstanding slightly increased to 523.3 billion baht, equivalent to NPL ratio of 3.12%. Meanwhile, the ratio of loans with significant increase in credit risk (SICR or stage 2) to total loans stood at 6.62%.

The banking system recorded net profit of 146.2 billion baht in 2020, a decline from the previous year. This was attributed to a high level of provisioning expenses to cushion against a potential impact of COVID-19 on loan quality going forward, combined with a high base effect from the recognition of extraordinary items from gains on sales of investments in 2019.

As a result, the ratio of return on asset (ROA) declined from 1.39% in the previous year to 0.65%. The ratio of net interest income to average interest-earning assets (Net Interest Margin: NIM) decreased from 2.73% to 2.51%.

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