Loan Growth in Thai Banking Sector Expected to Slow Due to Rising Uncertainty

Strategic Insights -

The loan growth in Thailand's banking sector is anticipated to decelerate in the second quarter this year, attributed to increasing uncertainty surrounding global trade policies. This projection is based on the assessment of an executive at the Bank of Thailand, who highlighted that total loans in the banking sector contracted by 1.3% year-on-year in the first quarter of 2025, marking the third consecutive quarterly decline. Key segments, such as auto hire-purchase loans and SME loans, experienced significant declines, with auto hire-purchase loans dropping by 10.2% and SME loans decreasing by 5.5%. In contrast, corporate lending posted a modest increase of 1.5%.

Key Takeaways:

  • Loan growth in the Thai banking sector is expected to slow in the second quarter due to rising uncertainty surrounding global trade policies.
  • Total loans in the banking sector contracted by 1.3% year-on-year in the first quarter of 2025, marking the third consecutive quarterly decline.
  • Business and consumer loans contributed to the contraction, with business loans declining by 0.8% and consumer loans by 2.2%.
  • Auto hire-purchase loans dropped by 10.2% in the first quarter, while SME loans declined by 5.5% and credit card loans downs 1.9%.
  • Corporate lending, however, posted a modest growth of 1.5% in the first quarter, while mortgage and personal loans recorded marginal increases of 0.2% and 0.3%, respectively.
  • Amid heightened uncertainty, both business and retail sectors have postponed investment and spending decisions, pressuring loan expansion in the second quarter.
  • The central bank directed the country's six domestic systemically important banks (D-SIBs) to conduct stress tests to evaluate the impact of tariffs, particularly on exporters to the US and local SMEs vulnerable to an influx of imported goods.
  • SME NPLs reached 7.35% in the first quarter, up from 6.88% in the prior quarter, and the NPL ratio for the banking sector increased to 2.90%, up from 2.78% in the previous quarter.
  • The central bank is working with other agencies to roll out the second phase of the "You Fight, We Help" debt relief program to provide ongoing support for struggling borrowers.

Statistics:

  • Total loans in the banking sector contracted by 1.3% year-on-year in the first quarter of 2025.
  • Business loans declined by 0.8% and consumer loans by 2.2% in the first quarter.
  • Auto hire-purchase loans dropped by 10.2% and SME loans declined by 5.5% in the first quarter.
  • Corporate lending posted a modest growth of 1.5% in the first quarter.
  • Mortgage and personal loans recorded marginal increases of 0.2% and 0.3%, respectively, in the first quarter.
  • SME NPLs reached 7.35% in the first quarter.
  • The NPL ratio for the banking sector increased to 2.90% in the first quarter, up from 2.78% in the previous quarter.
  • SMEs account for 20-30% of D-SIBs' loan portfolios.

Sources:

Suwannee Jatsadasak, assistant governor at the Bank of Thailand,

Bank of Thailand data