Bangkok Bank CEO hopes Thailand's NPL ratio won't peak at 4%

But analysts think this scenario is "too pessimistic".

Well-regarded banker Mr. Chartsiri Sophonpanich, Bangkok Bank’s CEO, reportedly said that he hopes the NPL ratio in the country as a whole peaks at no more than 4%, with 3.0-3.5% of 2017 GDP projected.

Analysts at Maybank Kim Eng find that scenario too pessimistic.

Here's more from Maybank Kim Eng:

According to the Bank of Thailand, gross NPL in the entire sector was THB393b in 3Q16, equivalent to 2.89%. To have 4% NPL ratio, gross NPL amount would need to surge by THB151b (40%).

This amount would be roughly equal to the NPL amount that the sector has been accumulating since 1Q13 when NPLs fell to the lowest at 2.15%. Extreme shocks that are powerful enough to bring down economic growth to negative territory may make that situation possible, but we do not see that extreme risk at the moment. 

Several indicators suggest the NPL situation is improving. New NPL formation continued to fall in 3Q16, in tandem with gradual economic recovery. Special-mentioned loans have been falling too, possibly indicating that new NPLs may continue to fall further (a tick-up in 3Q16 perhaps was just due to seasonality effect).

Next year the economy should continue to expand by around 3%, which is not that bad. Rising inflation should also help boost SMEs’ margins, improving the NPL picturein this sector, which has been the main source of NPL formation this time around. We reiterate NPLs should have peaked in 3Q16.