Bangkok Bank (BBL), Thailand's largest lender by assets, warned its non-performing loans (NPLs) will keep rising slowly until the end of this year due to borrowers' deteriorating debt servicing ability amid the sluggish economy.
However, the proportion of bad loans is expected to be maintained at the current level of 2.5% of outstanding credit, thanks to the growing lending portfolio.
BBL's bad loans have so far risen by 4 billion baht to 45 billion baht from the end of last year.
Higher debt burden of borrowers amid the economic slowdown is pushing up the bank's bad loans.
Retail and small and medium-sized enterprise (SME) borrowers are more affected by the murky economic situation than large corporate customers, said senior executive vice-president Suvarn Thansathit.
"The NPL increase in negligible when compared with our total loan portfolio, solid loan growth, and strong loan-loss coverage ratio. But we need to closely monitor the situation and provide assistance to customers properly," he said.
Strong domestic consumption, which earlier helped shield the country from the global economic slowdown, is having a backlash on local consumers.
The most affected group is those at the low end of the income scale, whose rising household debt is preventing them from borrowing and spending more.
At the end of the first quarter, Thailand's household debt amounted to 8.97 trillion baht or 77.5% of gross domestic product.
Given the marginal increase in NPLs, Bangkok Bank does not need to set aside additional loan-loss provisions for the rest of the year.
It has the highest loan-loss coverage ratio in the industry, at 206.1% at the end of June. Total loans outstanding stood at 1.55 trillion baht and the NPL increase is in line with the industry's trend.
The central bank recently said local banks' NPL ratio was steady at 2.25% of total lending at the end of August from a year earlier.
Mr Suvarn said some of the current flood-hit-customers, retailers and SMEs have asked for relaxation of repayment conditions.
BBL has no special package for its flood-hit clients, but helps flood victims on a case-by-case basis by giving a grace period and additional support for working capital, as well as extending repayment periods.
The bank has not evaluated losses from the ongoing floods, but said the extent could be smaller than in 2011 due to a smaller scale.
Shares of BBL closed on the Stock Exchange of Thailand at 205 baht yesterday, down 2 baht, in trade worth 277.36 million baht.