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Thailand's loan-loss reserves sufficient to cope with

Publication Date : 07-07-2012


Leading bankers of Thailand say their loan loss coverage ratios are sufficient to handle the country's central bank's call for an increase in loan loss provisions to fend off any effects from the euro crisis.

The coverage ratio is a measure of a bank's ability to cope with non-performing loans. It is calculated by dividing the ending balance of the institution's loan loss reserves by total (non-performing loans) NPLs.

Chartsiri Sophonpanich, president of Bangkok Bank, said it had closely followed the situation in the euro zone with a view to its impact on the bank's operations even though the crisis has not yet directly affected the Thai economy.

"It will eventually affect the economy, however, so we should cautious about the situation," he said.

The Bank of Thailand's call for an increase in loan loss provisions is reasonable, he said. However, Bangkok Bank already has a high provision in the range of 1.5 billion to 1.8 billion baht (US$47.42 million to $56.91 million) per quarter.

Chartsiri said his bank's coverage ratio was sufficient to handle any impact from the euro-zone crisis. It is the highest among the big four banks at around 193 per cent.

Bangkok Bank will also carefully control the growth of lending, with this year's target of 6-8 per cent unchanged even though overall lending in the banking industry is mounting sharply.

A conservative loan-growth policy is a safety measure for the bank, he said.

Kannikar Chalitaporn, president of Siam Commercial Bank, said it might consider increasing its loan loss provision as recommended by the central bank. However, it has already increased the provision to 500 million baht ($15.81 million) per month from 300 million baht ($9.48 million) per month last year.

SCB's coverage ratio is 130 per cent.

She said some impact from the euro crisis might be seen in Thailand in the fourth quarter of this year and full impact next year.

To ease the impact, all enterprises must prepare now, she said.

"The euro debt crunch might create a worry for businesses, but we should not panic, because the Thai economy so far continues to grow steadily," she said.

SCB has the highest lending growth among the top four banks. Its loans in the first half surged more than 10 per cent, higher than the bank expected.

Kannikar said liquidity in the entire industry had been reduced because of soaring loan growth; therefore, the banks will aggressively chase funds with the launch of attractive products to cover the loan demand.

Apisak Tantivorawong, president of Krung Thai Bank, said it had set a loan loss provision of 500 million baht ($15.81 million) per month since 2010, enough to protect it from any effects from the euro zone's problems.

Increasing the provisions means banks have to reallocate funds from their profits, he said, adding that KTB had no reason to increase them because its NPL rate is low.

Apisak said the bank would raise its loan-growth target for this year after achieving 7-per-cent growth in the first half. The new target will be proposed to the board of directors this month.

He said KTB's return on equity was 15-16 per cent, which could be increased in line with the growing profit.


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