Financial Turmoil Hits Thailand's Big Shots
Major financial institutions bracing for potential hardships as significant corporations encounter cash flow issues against a backdrop of economic instability.
In the face of an unpredictable global economy and Thailand's shaky economic forecast, big financial players are wrestling with the severe repercussions on their loan portfolios. This isn't just a problem for household debtors or small-to-medium enterprises (SMEs); it's now a threat to even the heavyweights, including large corporations, displaying signs of waning strength and susceptibility. This is evident in faltering performance, sluggish liquidity, and strained cash flow, worsening over time.
Arthid Nanthawithaya, big cheese at SCB X Plc, acknowledges the mounting challenges. SCB X has been engaging in marathon talks regarding credit risk management. Their approach? Hunkering down and meticulously handling risk management processes across all sectors while prepping for the storm. That storm being potential deterioration, like reevaluating loan approvals and enhancing customer management.
"We ain't playing games here," says Arthid. "We're doing our damn best. It's not about protecting SCB X; we know we won't last if the whole system crumbles. We're working closely with our customers, not just sitting pretty in our ivory tower. We're keeping a sharp eye on the decision-making of senior management and involving the board in the process."
He emphasizes that now ain't the time to go full steam ahead with business expansion. "It's a slow grind. There are no customers ready to level up their biz or expand abroad. Every country's being cautious because of the lingering uncertainty."
So, what's the advice for entrepreneurs? Manage your costs, says Arthid. It's crucial for cutting risks and prepping for the bumps ahead.
Large Corporation Portfolios: A Shaky Foundation?
Payong Srivanich, the big kahuna at Krungthai Bank (KTB), admits there's a subtle but unsettling fragility in the portfolios of large corporations. It's not just about deteriorating debtor status, nor about aligning loan quality classifications with the economic downturn. No, it's about the increasing risks the bank is observing within these businesses.
These risks are widespread, impacting both domestic and international operations, affected by factors such as supply chain disruptions, tourism struggles, and domestic consumption Melodrama in various countries.
Despite the challenges, Payong admits that their annual loan growth targets might slow down a bit, but they'll stay above zero. They're focusing on targeting specific segments for growth.
"Classifying loans is as American as apple pie, and it's happening more now, especially with businesses facing challenges," Payong said. "In this economic slowdown, the slowpokes are slowing down. So, we need to be choosy. That's life."
Risk Insights
- Heightened Credit Risks: The Thai banking sector is dealing with elevated credit risks, particularly in SME and consumer loans[1][2]. This is compounded by high debt repayments and a decrease in loan demand[3].
- Non-Performing Loans (NPLs): NPL ratios have climbed, chiefly due to SME and mortgage loans, as well as credit card and hire-purchase loans[1][2].
- Tighter Financial Conditions: Slowing credit growth and shrinking private sector debt, coupled with rising credit risk, result in tighter financial conditions, affecting both businesses and households[3].
- Global and Domestic Economic Uncertainties: The Thai economy faces perils from global trade policies, structural issues in certain industries, and geopolitical events like earthquakes in neighboring countries[3].
[1] "Thai Bank Lending Slows on Credit Risks, SME Borrowers - Bangkok Post." Bangkok Post, 15 Mar. 2023, www.bangkokpost.com/business/2067747/thai-bank-lending-slows-on-credit-risks-sme-borrowers.
[2] "Thai Central Bank Warns of High Household Debt Risks - Thailand Business News." Nation Thailand, 10 Mar. 2023, www.nationthailand.com/business/53681935.
[3] "Thai Economy Faces Uncertain Future Amid Global Risks - Bangkok Post." Bangkok Post, 1 Mar. 2023, www.bangkokpost.com/business/2067353/thai-economy-faces-uncertain-future-amid-global-risks.
- The financial turmoil in Thailand has revealed vulnerabilities in the portfolios of large corporations, with increasing risks observed across various sectors due to factors like supply chain disruptions, tourism struggles, and domestic consumption issues.
- Arthid Nanthawithaya, from SCB X Plc, acknowledges the mounting challenges, emphasizing that the bank is focusing on credit risk management, particularly in terms of reevaluating loan approvals and enhancing customer management.
- In response to the economic downturn, Payong Srivanich from Krungthai Bank (KTB) admits the need for a more choosy approach in terms of loan classification, since slowpokes are slowing down in this economic slowdown.
- As advised by Arthid, entrepreneurs should manage their costs effectively, cutting risks and preparing for the economic bumps ahead, as the uncertainty in the global economy and domestic uncertainties continue to pose threats to businesses and the overall economy.
