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Bank's housing NPLs reach record high

The Nation April 25, 2009 Thai banks' non-performing loans in the housing sector hit a record high at the end of last month, while NPLs in other sectors also rose across the board, according to a senior Bank of Thailand official. Housing NPLs came in at 4 per cent of outstanding lending at the end of the first quarter, up from 3.6 per cent three months earlier. Nawaporn Maharagkaga, senior director of the Financial Institutions Strategy Department, yesterday said the central bank would keep a close eye on housing NPLs, although commercial banks remain comfortable about extending mortgages, particularly in the low end of the market. "This is the first time that NPLs in the sector have shot up [to this extent], so we have to keep a close eye on the situation," she said. The central bank has not yet established why bad loans in the housing sector have begun to shoot up so dramatically. Some banks have, however, found that many foreigners are casting off their condominiums. NPLs for credit-card and hire-purchase debt also rose. Nawaporn said such consumer lending would also be monitored, as rising unemployment is an increasing concern. Credit-card NPLs rose from 2.9 per cent in last year's fourth quarter to 3.1 per cent in the first quarter of this year. "But the overall figures remain low," Nawaporn said. Aside from consumer loans, NPLs in the manufacturing, commerce and service sectors also rose significantly. Bad loans in manufacturing came in at 9 per cent in the first quarter, compared with 8.4 per cent three months earlier. In the commerce sector, NPLs jumped from 5.7 per cent to 6.4 per cent, and from 7.1 per cent to 7.8 per cent in the services sector. The banking system's total NPLs amounted to Bt416.1 billion, or 5.51 per cent of total lending, against 5.26 per cent at end-December. The increase was largely in Thai banks' balance sheets, while the bad loans of foreign full branches dropped. NPLs of Thai banks were Bt404.6 billion, or 5.89 per cent of outstanding lending, against 5.62 per cent in the previous quarter. The central bank did not project an NPL trend, realising there are both positive and negative factors putting pressure on banks' balance sheets. Nawaporn said the global and domestic economic downturn could fuel NPLs. However, developed countries have spent a great deal of money to revive their economies, which should in turn provide a local boost. Moreover, some debtors have paid back what they owe, because they did not after all need the additional funds for production this year. Some banks have also sold NPLs to asset-management companies. The Bank of Thailand believes the recent increase in NPLs is not caused by a rise in strategic NPLs - those held by borrowers able to repay their debt, but who choose not to do so. Nawaporn said debtors should not tarnish their financial history, as that would negatively affect them when the economic recovery begins. The banking system's strength can be seen from its high capital-adequacy ratio of 14.6 per cent as of end-February, she said. "Their capital level is quite high, which can cushion [increasing NPLs]. The impact on the banks' stability is not a big concern, as they can take care of themselves," she added.

 

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