The banking system remains robust, supported by strong capital, provisions, and liquidity. However, overall loan growth declined by 1.0% year-over-year, driven by reductions in SME and consumer lending amid increased credit risks.
Key Points
- The banking system remains resilient with strong capital, provisions, and liquidity, though overall loan growth contracted 1.0% year-over-year due to declines in SME and consumer lending amid heightened credit risks
- The NPL (non-performing loan) ratio increased to 2.94%, while Stage 2 loans (significant credit risk increase) rose to 7.24%, though new NPL formation has moderated
- Bank profitability declined compared to last year, primarily due to lower net interest income from reduced lending and interest rate cuts (including those under the “Khun Soo, Rao Chuay” assistance program)
- Household debt-to-GDP and corporate debt-to-GDP ratios both decreased in Q2 2025, though concerns remain about SME and household debt serviceability amid economic slowdown and U.S. tariff impacts
The Thai banking system remains resilient, supported by strong capital levels, comprehensive loan loss provisions, and ample liquidity. In Q3 2025, overall loan growth within the banking system, including licensed banks and their subsidiaries, contracted by 1.0% year-on-year, consistent with the previous quarter’s trend. This decline was driven by reductions in SME and consumer loans, reflecting elevated credit risks. Conversely, lending to large corporates showed a slight increase despite weaker loan demand and ongoing debt repayments. Loan quality, measured by non-performing loans (NPLs or Stage 3), remained stable, with a notable moderation in new NPL formation.
Outstanding Stage 3 loans decreased to 544.0 billion Baht in the third quarter of 2025. However, the NPL ratio rose to 2.94%, partly attributed to the contraction in the loan base. Stage 2 loans increased, driven by qualitative loan classification based on borrower-specific factors among a few large corporates and, to some extent, improved reclassification from Stage 3. As a result, the Stage 2 ratio climbed to 7.24%. Despite these challenges, commercial banks continued supporting borrowers and managing their loan portfolios effectively. Bank profitability declined compared to the same period last year, primarily due to reduced net interest income stemming from lower lending volumes and interest rate reductions applied to borrowers, both through the banks’ own adjustments and the ‘Khun Soo, Rao Chuay’ program.
