State banks’ 2024 loans up, profit down, SM loans on watch

The Fiscal Policy Office (FPO) reported that Thailand's specialised financial institutions (SFIs) demonstrated notable growth in both loan and deposit volumes as of December 2024. 

However, challenges remain in maintaining profitability and ensuring asset quality, which continue to require close monitoring.

The report covers six SFIs: Government Savings Bank, Bank for Agriculture and Agricultural Cooperatives (BAAC), Government Housing Bank (GHB), Islamic Bank of Thailand, Small and Medium Enterprise Development Bank of Thailand (SME D Bank), and Export-Import Bank of Thailand (EXIM Thailand).

As of December 2024, total outstanding loans across SFIs stood at 6.25 trillion baht, marking a year-on-year (YoY) increase of 4.03% and a quarter-on-quarter (QoQ) rise of 2.83%. Meanwhile, total deposits reached 6.49 trillion baht, reflecting YoY growth of 4.12% and QoQ growth of 1.97%, indicating ongoing expansion in financial activities.

Despite this growth, SFIs continue to face profitability pressures. Net income in December 2024 stood at 51.2 billion baht—up from the previous quarter but down 17.13% compared to the same period the year before. This highlights the difficulty SFIs face in sustaining or improving profitability levels.

Asset quality also remains a critical concern. The non-performing loan (NPL) ratio declined slightly to 4.59% from 5.04% in the previous quarter, signalling modest improvement. However, the total NPL volume remained high at 326.2 billion baht.

Of particular note is the increase in special mention (SM) loans—those overdue between 1 to 3 months—which rose to 402.6 billion baht, accounting for 5.67% of total loans. This indicates rising vulnerability within the loan portfolio that requires proactive risk management to prevent further deterioration.

Nevertheless, the SFIs maintain a strong buffer against credit risk. Loan loss provisions stood at 2.64 times the volume of NPLs (or approximately 264%), offering a solid safeguard against potential asset quality shocks.

In terms of financial stability, the capital adequacy ratio (BIS ratio) was 15.22% in December 2024, down slightly from 15.37% the previous quarter but still well above the minimum regulatory requirement. The loan-to-deposit (L/D) ratio rose to 96.38%, reflecting higher lending activity.

In summary, Thailand's SFIs showed encouraging signs of growth in credit and deposit volumes in December 2024, contributing to economic activity. However, declining profitability and rising risks in SM loans underscore the importance of effective asset quality management and financial discipline moving forward.