BANGKOK, Thailand – Thailand’s banking loans contracted in the 1st quarter of 2025 as repayments outpaced new lending and Non-Performing Loans (NPLs) rose.
Suwannee Jatsadasak, Assistant Governor at the Bank of Thailand, reported that commercial bank loans in the quarter contracted by 1.3% year-on-year. The contraction was mainly driven by high levels of debt repayment. While large corporate loans expanded, SME and consumer loans declined, reflecting persistent credit risk concerns.
NPLs rose to 548.1 billion baht, lifting the NPL ratio to 2.90%, largely due to SME and mortgage loan stress. NPLs from credit cards and auto loans also increased due to a shrinking loan base. Meanwhile, Stage 2 loans declined, mainly from repayments by large businesses, holding the Stage 2 loan ratio steady at 6.97%.
Despite these trends, banks have continued supporting debtors and managing loan quality. Operating performance improved from the previous quarter due to lower marketing and IT expenses, along with gains from non-interest income. However, net interest income declined in line with reduced interest rates.
The central bank noted that tight financial conditions and high household debt burdens remain a concern, especially for vulnerable groups with slow income recovery. External pressures from global trade policies also pose risks.
The central bank’s “Khun Su Rao Chuay” debt assistance program remains under close watch. As of Q4 2024, household debt-to-GDP had declined slightly, driven by a slowdown in household credit growth. Corporate debt-to-GDP also dropped, mainly due to reduced bond market borrowing.
While overall business profitability held steady year-on-year, it weakened from the previous quarter. Although tourism-related services and manufacturing offered some support, construction and real estate faced headwinds due to weak housing demand. (NNT)
