Thai banks' bad assets soar in 1H16 as more SMEs use houses as collateral

KrungThai Bank's non-performing assets could reach as much as US$1bn in 2H16.

Maybank Kim Eng reports that Thailand's two biggest lenders, Krung Thai Bank (KTB) and Bangkok Bank (BBL), saw their non-performing assets (NPAs) rise in the first six months, driven mainly by small and medium-sized enterprises (SMEs) using their houses as collateral.

Here's more from Maybank Kim Eng:

KTB's NPA portfolio rose to THB28.5b in the first half, with SME clients making up most of the gain. A rise in the non-performing loans (NPLs) of mortgage borrowers and corporate clients also put pressure on the bank's NPAs, said Chaichan Palanon, director of credit restructuring and the asset management group.

Given the fragile recovery of the economy and borrowers' inability to repay debt, KTB's NPAs are likely to increase further in the second half. In the best-case scenario, bad assets would increase to THB30b by year-end. The worse case would be THB35b.

KTB has adjusted its strategy by selling NPAs to asset management firms. The bank plans to sell THB6.4b worth of NPAs throughout the year. In the first half, KTB sold THB3b worth of NPAs.

BBL executive vice-president Thaweelap Rittapirom said BBL's NPAs rose in accordance with higher NPLs in the first half but remained at a manageable level. The rising NPAs were largely from SMEs using personal assets such as houses as collateral. BBL typically manages NPLs and NPAs on its own rather than selling them. It offers special packages for those wanting to borrow to buy second-hand property.