Maybank’s Financial Performance Impacted by Rise in Bad Loans
Thai banks are expected to face challenges ahead as they grapple with weak loan growth and rising non-performing loans (NPLs) due to the uneven economic recovery, according to Maybank Securities (Thailand).
Challenges Faced by Thai Banks
The Thai unit of Kuala Lumpur-based financial group Maybank highlighted that the weak loan growth trend is likely to persist for Thai banks in 2025-2026. This is primarily due to the fact that troubled debtors are struggling to service their debts amidst the ongoing economic uncertainties.
Sector loan growth in Thailand took a hit, contracting by 1% in the first 11 months of 2024 and further declining by 0.6% year-on-year in November. Specifically, retail loans and SME credit expansion experienced a significant slowdown, attributed to high household debt levels and a weak debt servicing ability.
Expert Insights and Forecasts
Jesada Techahusdin, an analyst with Maybank Securities (Thailand), emphasized that aggregate loans for banks are projected to grow only by 1.4% year-on-year in 2025, mainly driven by corporate lending. He also noted that banks focusing on auto hire-purchase are expected to see negative loan growth due to sluggish domestic auto sales.
Maybank’s economist forecasts a modest Thai growth rate of 2.6-2.8% in 2024-25, aligning with predictions from the National Economic and Social Development Council. While certain sectors like tourism and services show signs of a solid recovery, industries such as petrochemical and automotive face competitive challenges, leading to reduced output and loan contractions.
Rising Non-Performing Loans and Earnings Pressure
According to the Bank of Thailand, the sector’s NPL ratio increased by 13 basis points quarter-on-quarter to 2.97% in the third quarter of last year. Moreover, the ratio of stage 2 loans to total loans also saw a rise, indicating a significant increase in credit risk.
Mr. Jesada warned that the NPL ratio is expected to climb in 2025 due to a smaller loan base and new NPL inflows from debtors struggling to service their debts. This, combined with weak revenue growth and the potential for a central bank policy rate cut in the first half of 2025, could further pressure banks’ earnings.
In conclusion, Thai banks are bracing for tough times ahead, navigating through a challenging economic landscape with caution and strategic planning to weather the storm of rising bad loans and weak loan growth.
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