Performance of the Thai Banking System in the First Quarter of 2015

No. 26/2015

Performance of the Thai Banking System in the First Quarter of 2015

Mr. Jaturong Jantarangs, Senior Director, Financial Institutions Policy Group, reported the Thai banking system’s performance in the first quarter of 2015 to remain resilient, with slower loan growth and slight deterioration of loan quality in line with slower-than-expected economic recovery. Nevertheless, the banking system maintained high level of provision and capital, with continued profit. Details are as follows.

The slower-than-expected economic recovery coupled with decelerated demand for corporate credit as a result of the economic slowdown led to slower loan growth at 4.3%, compared with 5.0% in the previous quarter. Corporate loan (68.7% of total loan) continued to expand at a decelerated rate of 2.9%. The slowdown was attributed mainly to commerce sector, whereas public utilities sector especially power plants, logistics and warehouses exhibited high loan growth. Loan to large corporate grew at 1.0%, down from 4.6% last quarter as large corporate turned to raising fund through financial instruments instead of bank loan. SME loan started to pick up and grew faster at 4.5%, after continued slowdown since the beginning of 2014. Consumer loan (31.3% of total loan) growth at 7.6% was relatively stable from last quarter, with expansion in personal loan and housing loan in contrast with continued contraction of car loan at 4.0%, compared to the same period last year.

Overall loan quality deteriorated from SME loan and consumer loan. Non-Performing Loan (NPL) recorded at 298.3 billion baht, increasing by 21.1 billion baht from last quarter

(compared with 13.0 trillion baht of total loan). Gross NPL to total loan ratio increased to 2.29% from 2.15% in the previous quarter. NPL ratio of large corporate was stable, while that of small SME and consumer loan increased, mainly from housing loan and collateralized personal loan. Special mention loan (SM : loan overdue above 1 month but not more than 3 months)

2.61% to 2.81%. However, banks have closely monitored and managed their loan portfolio, and the ratio of actual to regulatory loan loss provision remained high at 165.9%.

The banking system had net profit of 52.5 billion baht in the first quarter of 2015, close to the level in the same period of last year, with increased profit from valuation of financial instruments and sale of debt securities, as well as a decline in operating expenses.

Capital fund of the banking system recorded at 2,025.1 billion baht, declining by 18.1 billion baht from last year as a result of redemption and gradual deduction of Tier-2 instruments not eligible under Basel III capital requirements. Thus, capital adequacy ratio (BIS ratio)

decreased slightly to 16.6%, while Tier-1 ratio was stable at 13.7%.

Bank of Thailand May 14, 2015

Contact: Financial Performance and Loan Analysis Team Tel: +66 (0) 2283 5980 e-mail: FP&LATeam @bot.or.th

Overall Performance of the Thai Banking System

in the First Quarter of 2015

Loan grew at 4.3%yoy, continuing to slow down in line with economic conditions.

Loan to large corporate decelerated as they turned to raising fund through capital market to replace bank

loan. Meanwhile, loan to SME and consumer continued to expand with higher growth rate in SME loan.

Overall loan quality deteriorated from SME and consumer loan.

NPL to total loan ratio increased to 2.29% from 2.15% in the previous quarter.

Loan loss provision remained high.

Ratio of actual to regulatory loan loss provision was at 165.9%.

The banking system remained profitable this quarter from trading activities

and sale of investment in securities.

Net profit increased by 1.4%yoy.

Capital fund remained high.

BIS ratio and Tier-1 ratio stood at 16.6% and 13.7%, respectively.

13.5 17.4 5.0 4.3 3.2 -8.9 19.1 2.3 -15 -10 -5 0 5 10 15 20 25 Q1 11 Q3 11 Q1 12 Q3 12 Q1 13 Q3 13 Q1 14 Q3 14 Q1 15 %yoy Total Loan GDP (Constant Price) 3

Loan growth slowed down

in line with the economic conditions

GDP and Loan Growth

Commercial Bank Loan Growth

5.0 4.3 4.0 2.9 4.6 1.0 3.5 4.5 7.4 7.6 -5 0 5 10 15 20 25 Q1 11 Q3 11 Q1 12 Q3 12 Q1 13 Q3 13 Q1 14 Q3 14 Q1 15

Total Loan Corporate Loan

Large Corporate Loan SME Loan Consumer Loan

% yoy

Large Corporate SME Consumer Total Large Corporate SME Consumer Total

2013 3,455 3,994 3,251 10,700 6.6 14.7 12.9 11.0

2014 3,507 4,241 3,493 11,241 4.6 3.5 7.4 5.0

Q1/2015 3,415 4,315 3,525 11,255 1.0 4.5 7.6 4.3

Corporate Loan

Corporate Loan Growth

 Corporate loan continued to expand at a decelerated rate in almost all sectors, except public utilities

sector that still exhibited high loan growth.

 Loan to commerce sector decelerated this quarter as some retail business raised fund through capital

market to repay bank loan.

Structure of Corporate Loan

as of March 2015

Manufacturing Commerce Financial Business Services Construction Real Estate Public Utilites _{Manufacturing}

Commerce Consumer 31.3 Financial Business Corporate 7 Public Utilities Services Real Estate Construction Others

Outstanding (Billion baht) Manufacturing Commerce Financial Business Services Construction Real Estate Public Utilities Others Total

2013 2,172 1,748 1,047 685 188 565 664 379 7,450

2014 2,245 1,838 1,008 683 197 585 755 436 7,748

Housing 15.2 Car 7.6 Personal 6.9 Caredit Card Corporate Consumer 5

Consumer Loan

Consumer Loan Growth

Structure of Consumer Loan

as of March 2015

(% to total loan)

 Consumer loan expanded well, except for car loan which continued to contract after high growth in

previous periods.

Housing Car Personal Credit Card

Outstanding (Billion baht) Housing Car Personal Credit Card

2013 1,506 890 671 184

2014 1,689 860 746 199

Loan quality

overall deteriorated from SME and consumer loan

Non-Performing Loan (NPL)

Special Mention (SM)

3.19 2.15 2.29 2.33 2.39 2.62 2.20 1.13 1.14 5.28 3.113.30 0 1 2 3 4 5 6 Q1 11 Q3 11 Q1 12 Q3 12 Q1 13 Q3 13 Q1 14 Q3 14 Q1 15 % NPL to Total laon % NPL to Consumer Loan % NPL to Large Corporate Loan

% NPL to SME Loan % to Total Loan 2.21 2.612.81 2.51 3.493.50 1.66 2.19 2.57 2.81 2.402.54 0 1 2 3 4 Q1 11 Q3 11 Q1 12 Q3 12 Q1 13 Q3 13 Q1 14 Q3 14 Q1 15 % SM to Total laon % SM to Consumer Loan % SM to Large Corporate Loan % SM to SME Loan

% to Total Loan

Large SME Consumer Total Large SME Consumer Total Large SME Consumer Total

2013 56.1 137.9 71.6 265.6 90.1 92.3 113.2 295.6 4,883.1 4,208.3 3,250.6 12,342.1

2014 55.8 137.9 83.5 277.2 108.0 106.5 121.9 336.4 4,941.4 4,438.8 3,492.6 12,872.9

Q1/2015 56.6 149.3 92.4 298.3 127.7 114.9 123.5 366.2 4,978.5 4,528.5 3,524.8 13,031.8

*Include interbank loan Outstanding (Billion baht)

7

Corporate Loan Quality

Non-Performing Loan (NPL)

Special Mention (SM)

% to total loan : Manufacturing % Commerce % Real Estate+Construction % Public Utilities % Services % 6.0 3.4 3.5 3.7 2.7 3.1 1.3 _{1.0 1.0} 6.6 3.3 3.2 8.9 4.4 4.5 0 2 4 6 8 10 12 Q1 11 Q3 11 Q1 12 Q3 12 Q1 13 Q3 13 Q1 14 Q3 14 Q1 15 Manufacturing Commerce Public Utilities Services

Real Estate + Construction % to loan 3.8 5.1 5.4 2.0 _{1.7 1.9} 3.3 2.4 2.8 4.9 2.5 3.3 2.5 2.8 3.1 0 2 4 6 8 10 Q1 11 Q3 11 Q1 12 Q3 12 Q1 13 Q3 13 Q1 14 Q3 14 Q1 15 Manufacturing Commerce Public Utilities Services

Real Estate + Construction % to loan

Manufacturing Commerce Public Utilities Services Real Estate + Construction NPL 78.3 40.9 11.2 23.8 34.6 SM 86.7 27.3 18.9 20.4 19.3 Loan* 2,172.1 1,748.3 664.0 685.4 753.4 NPL 75.8 48.9 7.3 22.2 34.7 SM 113.8 32.1 18.3 16.8 22.0 Loan* 2,245.3 1,837.8 755.2 682.9 782.3 NPL 79.2 56.2 7.9 21.8 35.6 SM 121.7 34.2 21.4 22.4 24.9 Loan* 2,253.6 1,817.7 774.6 684.9 798.8

*Include Interbank loan

Q1/2015

Corproate Loan (Billion baht)

8

Consumer Loan Quality

Non-Performing Loan (NPL)

Special Mention (SM)

Housing Car Personal Credit Card Housing Car Personal Credit Card Housing Car Personal Credit Card

2013 34.2 18.0 14.6 4.8 24.4 68.8 16.1 3.9 1,505.7 889.8 671.0 184.1

2014 _{36.9 21.8 18.3 6.4 27.5 71.2 19.0 4.2 1,688.5 859.5 745.7 198.9}

Q1/2015 _{41.1 22.6 21.6 7.0 28.6 70.7 19.8 4.4 1,716.1 854.4 772.1 182.2}

*Include interbank loan Outstanding (Billion baht) NPL SM Loan* 2.8 2.2 2.4 2.7 3.2 3.9 2.3 2.5 2.8 1.2 2.5 2.6 0 1 2 3 4 5 Q1 11 Q3 11 Q1 12 Q3 12 Q1 13 Q3 13 Q1 14 Q3 14 Q1 15

Housing Credit Card

Personal Car % to loan 1.4 1.6 1.7 1.71.7 2.1 2.4 2.5 2.6 5.5 8.3 8.3 0 2 4 6 8 10 Q1 11 Q3 11 Q1 12 Q3 12 Q1 13 Q3 13 Q1 14 Q3 14 Q1 15

Housing Credit Card

Personal Car

9

Loan loss provision remained high

169.4 _165.9 100 120 140 160 180 200 Q1 11 Q3 11 Q1 12 Q3 12 Q1 13 Q3 13 Q1 14 Q3 14 Q1 15

Actual / Regulatory loan loss provision ratio

%

Loan Loss Provision (Billion baht) Actual Provision Regulatory Provision

2013 383.5 227.9

2014 397.8 234.9

2.53 2.55 2.60 2.61 2.54

1.25

Operating Profit Net Profit

Billion baht 12.8%yoy 17.3%yoy 2.3%yoy 21.1%yoy 17.3%yoy 5.0%yoy 6.7%yoy 11.6%qoq 7.9%qoq 1.4%yoy

Banks remained profitable

11

Capital fund remained high

New accounting standard on employee benefits adopted in 2011 Basel III regulation adopted in 2013

16.8 16.6

13.7 13.7

3.1 2.9

0

5

10

15

20

25

Q1

11

Q3

11

Q1

12

Q3

12

Q1

13

Q3

13

Q1

14

Q3

14

Q1

15

%

CAR

Tier-1

Tier-2

Basel lll

Liquidity eased further this quarter

Loan, deposit and Borrowing Growth

Loan to Deposit and Borrowing

13.5 5.0 4.3 11.6 5.9 6.2 11.8 6.2 6.0 0 5 10 15 20 25 Q1 11 Q3 11 Q1 12 Q3 12 Q1 13 Q3 13 Q1 14 Q3 14 Q1 15 Loan Deposit+B/E Deposit B/E and Borrowing % yoy % yoy 87.1 95.7 94.5 83.2 89.7 89.1 75 80 85 90 95 100 105 110 Q1 11 Q3 11 Q1 12 Q3 12 Q1 13 Q3 13 Q1 14 Q3 14 Q1 15 Loan to Deposit and B/E

Loan to Deposit B/E and Borrowing %

Outstanding (Billion baht) Loan Deposit and B/E Deposit, B/E and Borrowing

2013 10,700 11,082 11,802

2014 11,241 11,741 12,530