Bangkok Bank’s large credit reserves lends stability to problem loans

The bank is expected to maintain strong solvency and liquidity.

Bangkok Bank is expected to maintain its strong solvency whilst problem loans will remain stable over the next 12 to 18 months, reports Moody’s Ratings.

Th bank’s problem loan ratio is forecasted to remain stable at 3.0% over the period, supported by the bank's focus on corporate lending and geographical diversification outside of Thailand. 

“[Bangkok Bank] has historically maintained a very high level of liquid assets on its balance sheet. The bank's access to funding will also remain strong because of its extensive network and entrenched franchise in Thailand. Its average liquidity coverage ratio was 277% in the fourth quarter of 2023,” Moody’s Ratings said in its latest ratings action on the bank, where it maintained the bank’s Baa1 rating and “stable” outlook.

Asset risk is also mitigated by Bangkok Bank's very large credit reserves, which accounted for around 10% of gross loans and 300% of problem loans as of the end of December 2023.

Return on tagine assets will remain at 1% over the next 12 to 18 months.

Profitability has also been improving thanks to policy rate hikes, although net interest margin will contract as rates have peaked and as deposit costs catch up.

Bangkok Bank’s Indonesian subsidiary Bank Permata will further provide a gradual uplift to the parent bank's profitability over the next 3 to 5 years.

“[Bangkok Bank's] capitalization will likely increase further over the next 12-18 months as the bank's internal capital generation has improved and will continue to outpace its capital consumption,” Moody’s Ratings said, noting that the bank has been rebuilding its capitalization following its Bank Permata acquisition in 2020. 

Bangkok Bank is targeting a Common Equity Tier 1 capital ratio of 16% over the next 12-18 months, up from 15.4% in 2023.