Thai household debt deeper than ever

[Benroon]

Lets make everyone's debts a bit bigger shall we ...

Thailand set to hike key interest rate to 9-year high
The Bank of Thailand (BoT) is poised to deliver another rate increase in line with an unwavering post-pandemic tightening strategy despite rapid disinflation and political gridlock.

The central bank will raise the benchmark one-day repurchase rate by 25 basis points to 2.25% on Wednesday, the highest level since January 2014, according to 19 of 21 economists surveyed by Bloomberg. The rest forecast a hold for the first time in a year.

Thailand’s policymakers continue to telegraph hawkish signals even after inflation cooled faster than most regional peers that have already paused tightening, or in the case of Vietnam already pivoted to rate cuts. Authorities are banking on tourism revival and firmer economic rebound to counter risks from delayed government formation.


https://www.bangkokpost.com/business/ge ... -year-high

Good luck with that ... banking on Indian and Chinese tourists to save the country from the political shitstorm ...

Thats not how it works, interest rate rises are to bring inflation under control which will do far more to raise people levels of debt. Look at the mess the UK is in because the Bank of England didn't raise them quickly enough.

[buksida]

Thats not how it works, interest rate rises are to bring inflation under control which will do far more to raise people levels of debt. Look at the mess the UK is in because the Bank of England didn't raise them quickly enough.

Wrong, its exactly how it works. When interest rates go up, banks increase their lending rates so people pay more for their mortgage/loan repayments putting them further into debt.

Lowering inflation should in theory lower prices, but we know that is never the case as in Thailand (and the UK) prices remain inflated despite inflation drops.

Inflation in Thailand is just 0.23% but prices are still very high across the board so the central bank increasing rates again just increases debt burdens and gives nothing to savers.

[buksida]

BAM predicts bad loan sales of B100bn in 2024
SET-listed Bangkok Commercial Asset Management Plc (BAM) expects sales of non-performing loans (NPLs) to reach 100 billion baht by 2024, in line with rising distressed debts.

NPLs in the banking industry total roughly 500 billion baht, while special mention (SM) loans, defined as loans overdue from 30 to 90 days, total nearly 1 trillion baht, said the company.

Given the expiration of the Bank of Thailand's debt relief measures later this year as the economy revives, more SM loans could be classified as NPLs next year. As a result, NPL sales are expected to increase in 2024, said BAM chief executive Bundit Anantamongkol.

On average, the NPL ratio in the banking sector is 2.7% of the total loan portfolio.

The ratio of some banks exceed that level and these banks may need to preemptively manage bad debts by selling them to asset management companies (AMCs), said Mr Bundit.

According to the company's data, NPLs in the banking sector increased from 465 billion baht in 2019 to 523 billion in 2020 as the pandemic raged.

Bad debt remained steady at 531 billion baht in 2021, 499 billion in 2022 and 498 billion at present. Under normal circumstances with no debt assistance measures, NPLs could increase to around 600 billion baht, he said.

https://www.bangkokpost.com/business/ge ... bn-in-2024

It is a small miracle that Thai banks can stay afloat.

[404cameljockey]

So sad. And some service staff bring up a child alone on 14,000-15,000 Baht a month. I hope we all remember to tip at bars, restaurants, petrol stations, etc.

[2/cb]

So sad. And some service staff bring up a child alone on 14,000-15,000 Baht a month. I hope we all remember to tip at bars, restaurants, petrol stations, etc.

I couldn’t agree more. Sometimes it’s easy to forget how well-off most of us farang are compared to Thai people in general.

[Dannie Boy]

I’m not sure why, but I always tip when I go to a restaurant but never when I stop at a garage for fuel - possibly because I normally put a 1,000 B of fuel in the car so don’t get any change and don’t look to see if I have a small value note?

[Benroon]

I always tip via the windscreen clean, but for filling up no not usually.

I was reading about a tips article today as it happens, whilst in the US they will chase you down the street if you don't tip, in many parts of Japan they find it insulting!

[Benroon]

Thats not how it works, interest rate rises are to bring inflation under control which will do far more to raise people levels of debt. Look at the mess the UK is in because the Bank of England didn't raise them quickly enough.

Wrong, its exactly how it works. When interest rates go up, banks increase their lending rates so people pay more for their mortgage/loan repayments putting them further into debt.

Lowering inflation should in theory lower prices, but we know that is never the case as in Thailand (and the UK) prices remain inflated despite inflation drops.

Inflation in Thailand is just 0.23% but prices are still very high across the board so the central bank increasing rates again just increases debt burdens and gives nothing to savers.

Your tail is wagging your dog. Yes obviously if rates go up - repayments go up, but if they don't go up and inflation spirals out of control then that is a far far worse scenario. Again the Bank of England have been caught napping as a great example. Short term pain for long term gain and all that.

However yes it is odd to raise them when inflation is so low and the target is 1-3%, however it was 3% in May so maybe there's a lag?

[buksida]

Warning over household debt surge
The National Economic and Social Development Council (NESDC) warns that Thailand's household debt is continuing to increase, with close monitoring required for auto loans and debt from savings cooperatives, says secretary-general Danucha Pichayanan.

He said during a press conference on the country's social outlook for the second quarter of 2023 that household debt amounted to 15.9 trillion baht in the first quarter of the year, an increase of 3.6%, accelerating slightly from 3.5% in the previous quarter, while the ratio of household debt to GDP stood at 90.6%, decreasing slightly from the previous quarter.

Mr Danucha said most of the growth in household debt in the first quarter came from the purchase of real estate and personal loans, up by 5% and 5.3%, respectively, when compared to the previous quarter.

As for the overall debt serviceability of households, non-performing loans (NPLs) were worth 144 billion baht at the end of March this year, equivalent to an NPL ratio of 2.68%, accelerating from 2.62% in the fourth quarter of 2022.

However, there are alarming household debt issues which should be addressed.

Firstly, bad debt and the risk of bad debt in auto loans are likely to continue to increase. In the first quarter of 2023, NPLs from auto loans increased by 30.3% from the same period last year while the proportion of special mention loans to total loans also continued to increase.

https://www.bangkokpost.com/business/ge ... debt-surge

I know they want to sell cars, but why are auto and finance companies so eager to put people into massive debt over vehicles they clearly can't afford and are likely to be repo'd. Certain showrooms in Thailand (Toyota and Isuzu) will ignore you if you're not taking out finance to buy a new car from them.

[Benroon]

I wonder how much of this household debt is legitimate or loan shark? Is either even measured? Go down any street and you will see business cards lying in the street, especially in the mornings before local businesses have swept them up. If you've ever wondered what they are, they all contain a number for short time(loan shark short time) loans, I've never seen a government initiative to stamp these out, but like everything, it depends who's toes you're stepping on.

I'm interested in the car loan bad debt, I was told by my BKK bank manager only one bank lends money on cars. Plus if this is true, where are all the repossessions sold?

[caller]

I wonder how much of this household debt is legitimate or loan shark?

The figures only include loans by authorised lenders.

'Household bank borrowing from traditional bank sources declined from 117 billion baht in Q3/2022 to only 15.6 billion baht in Q4/2022. Thai households were turning to non-bank sources for a rescue. Quarterly borrowing from non-bank sources jumped from 33.8 billion baht in Q3/2022 to 155.1 billion baht in Q4/2022.'

https://www.bangkokpost.com/opinion/opi ... time-bombs

[buksida]

EV seizures set to increase
Concerns over non-performing loans (NPLs) in the automotive industry have expanded to the electric vehicle (EV) segment as some buyers may not be able to pay installments for their EV, amid a rapid sales increase.

This group of buyers is often referred to as "new-generation people" whose financial status is not strong, said Pinyo Tanawatcharaporn, former president of the Association of Used Car.

Their vehicles are likely to be seized if they fail to manage their installments well amid the economic slowdown and weak purchasing power, he said.

"The association expects to see EV seizures increase in the second half of this year," said Mr Pinyo.

If the seized EVs were sold in the second-hand car market, it's unlikely financial institutions would arrange loan schemes for people wishing to buy a used EV, he said.

"If a customer wants to buy a used EV, they must pay in cash," said Mr Pinyo.

Banks are not confident of granting loans in the second-hand EV market, which is expected to be small as many people still want to buy a new EV, the prices of which have tended to decrease as more car companies have entered the market, leading to a price war.

https://www.bangkokpost.com/business/mo ... o-increase

In Thailand, everyone wants to have what they can't afford to show 'status', and shiny and new is always best. Thais dont buy an EV for environmental benefits, they buy one to look good. Why the banks keep dishing out finance to those who clearly can't repay it is beyond me, though they probably get a kickback from the auto makers who can boost their sales figures and don't care if it gets repo'd.

[buksida]

Debts under legal process almost as high as Thailand's GDP
The amount of debt under legal process is fast approaching Thailand’s total household debt of 16 trillion baht and the country’s gross domestic product (GDP) of 17 trillion baht, NCB chief executive Surapol Opasatien said.

The NCB on Wednesday reported a total of 2,674,081 debt-related cases as of November 2023, valued at 15.99 trillion baht.

In 1.05 million cases, amounting to around 15 trillion baht, verdicts have already gone in favour of the creditors, but they are yet to enter the legal execution process Surapol said.

Around 691,000 cases, amounting to 761 billion baht, are currently under the legal execution process. This could mean the debtors being forced to sell off their houses, cars or other assets to pay off the debt, Surapol explained.

When divided by types of debts, those from informal loans were the highest at over 1.75 trillion baht, followed by juristic person loans at 1.01 trillion baht, personal loans at 215 billion baht, hire purchase loans at 84 billion baht, and credit card loans at 44.3 billion baht.

Surapol added that housing loans were the most worrying. More than 180 billion baht of debts had already become non-performing loans (NPLs), increasing 7% year on year in 2023. Meanwhile, the amount of housing debts in the SM category (defaulting not more than 90 days) rose to 178 billion baht, soaring 31.1% year on year in 2023.

Surapol attributed the hike in interest rate as the main reason for the defaults in mortgages. “If the interest goes up by 0.25%, people who earn less than 20,000 baht per month would have trouble paying their increasing mortgage and start defaulting,” he said.

https://www.nationthailand.com/thailand ... y/40035562

[buksida]

Bad loans set to surge at banks in Q1
The banking sector is poised for higher non-performing loans (NPLs) in the first quarter this year, stemming from retail and small and medium-sized enterprises (SMEs), according to brokerages.

Krungsri Securities expects banking NPLs to escalate to 3.11% in the first quarter, rising four basis points year-on-year and 10 basis points quarter-on-quarter. The decline in asset quality following the expiration of the Bank of Thailand's debt relief measures is a significant factor exerting pressure on the sector's loan quality, noted the brokerage.

Banks are scheduled to announce 2024 first-quarter results between April 17-22.

The central bank reported banks approved loans under debt assistance measures totalling 348 billion baht, representing 99.4% of the total allocated budget of 350 billion. The loans were granted to 67,725 borrowers affected by the pandemic, offered through two programmes: debt recovery and asset warehousing.

The debt assistance schemes started in April 2021 and expired on April 9, 2024.

https://www.bangkokpost.com/business/ge ... anks-in-q1