Thai banks' credit growth falls to 1% in H1 as demand wanes

Retail loan growth fell to 3.1% as auto sales and mortgage growth stumble.

Thai banks' credit grew by just 1% in the first six months of 2019, reflecting lack of demand and conservative underwriting by cautious lenders, according to Fitch Solutions. 

Retail lending growth fell to 3.1% in H1, down from 7.8% in the same period 2018 amidst slowing auto sales and mortgage growth. In April, the central bank's plan to tighten loan-to-value measures on mortgages kicked into effect as part of the regulator's effort to curb risks and speculative activity in the housing market.

Also read: Thai banks brace for blow from tighter mortgage curbs

Similarly, corporate lending also encountered pressure, with mounting approval delays of new infrastructure projects. "Whilst expected to improve, it will likely trail Fitch's full-year forecast of 7% given current trends, with increased preservation of capital as a result," Jindarat Sirisithichote, analyst at Fitch Solutions said in a report. 

Systemwide loan growth is expected to slow to 4.5% by end-2019, the firm said in an earlier report. 

Asset quality remained stable with an impaired loan ratio of 3.7% by end-June, although the SME, residential mortgage and auto loan segments continue to pose downside risks. Return on assets for listed banks was 1.3% at June 31, down 2 bps YOY. 

"[W]e would expect profitability and stability of returns for the remainder of 2019, with a continued gradual buildup of capital to guard against downside risks as well as upcoming regulatory measures such as IFRS9 implementation in 2020," Sirisithichote added.