KUALA LUMPUR, Malaysia--10 Apr--Bernama-AsiaNet/InfoQuest
"The Thai banking system's asset quality held up well in 2012 despite its worst floods in 70 years, which affected many sectors of its economy," observed Wong Yin Ching, Co-Head of Financial Institution Ratings at RAM Rating Services Berhad, upon the release of the rating agency's research report, Leading ASEAN Banks. The publication features 20 prominent ASEAN banks; these include the 6 largest Thai banks - Bangkok Bank Public Company Limited, Krung Thai Bank Public Company Limited, Siam Commercial Bank Public Company Limited, Kasikornbank Public Company Limited, Bank of Ayudhya Public Company Limited and Thanachart Capital Public Company Limited.
Sophia Lee, Co-Head of Financial Institution Ratings, added, "The Thai banking system kept up its loan growth in 2012, with an expansion of 13.7%. Apart from construction-related lending, the stronger growth in household loans had been driven by the Thai government's stimulus measures, such as higher minimum wages and tax incentives for consumers' first car purchase. The Kingdom's economic growth rebounded strongly last year with its GDP expanding by 6.6% despite the weaker global economic conditions."
The regulator's temporary relaxation of non-performing loan ("NPL") recognition criteria have helped keep the Thai banking system's NPLs at a manageable level; the industry's NPL ratio stood at 2.3% as at end-2012 (end-2011: 2.7%). Additional NPLs relating to the Thai floods may emerge as the Bank of Thailand's ("BOT") regulatory forbearance measures are being phased out. Nonetheless, we do not foresee material asset quality stress for the banking system. We also note that most of the flood-hit businesses had resumed operations.
"Compared to its regional peers, the Thai banking system contains relatively high levels of restructured loans and foreclosed assets, and includes legacy loans from the Asian financial crisis. These comprise around 3%-8% of the aggregate amount of loans and foreclosed assets of the 6 Thai banks featured in this publication. We note higher ratios for banks with large lending portfolios of corporates and small and medium-sized enterprises ("SMEs"), such as Bangkok Bank, Krung Thai Bank and Kasikornbank," Yin Ching pointed out.
"Thai banking sector's profitability is viewed to be sound with an average return on assets of 1.7%. Players with larger exposures to the higher-yielding retail and SME segments - such as Siam Commercial Bank and Kasikornbank - have generally delivered more impressive profit performances. We also note that the Thai banking system's funding profile has improved. The industry's loan-to-deposit ratio had eased to 96% as at end-2012, from more than 100% the previous year. Meanwhile, the BOT has implemented stricter capital requirements than recommended by the Basel Committee of Banking Supervision. Thai banks are required to comply with a minimum common-equity tier-1 ratio of 4.5% effective 1 January 2013, i.e. 1 percentage point higher than recommended. The larger Thai banks are expected to comfortably comply with the requirements given their robust capitalisation levels," Sophia commented.
Click here to download Leading ASEAN Banks:
http://www.ram.com.my/docs/publication/Leading%20ASEAN%20Banks%20%28final%29.pdf
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Published by RAM Rating Services Berhad
(C) Copyright 2013 by RAM Rating Services Berhad
SOURCE : RAM Rating Services Berhad
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