Economic risk high for banks operating in Thailand – S&P

SINGAPORE In a report published today, ratings agency Standard and Poor’s says it believed economic risk for banks operating in Thailand is high. S&P classifies the banking sector of Thailand in group '6' along with Bahrain, Brunei, Colombia, Guatemala, Iceland, Ireland, Italy, Turkey, and Uruguay.

S&P says that while the Thai economy is diversified, it has low per capita GDP (estimated at US$5,875 for 2015). Economic growth has recovered from 2014 levels, but the recovery has been gradual - and political uncertainties continue to cast a shadow over the country.

“High household debt and corporate leverage add to economic risk. In recent years, the level of stressed assets in the Thai banking system has increased, especially in the consumer loans and small and midsize enterprise segments,” S&P says.

“But the pace of build-up of economic imbalances has abated, with moderation in growth in private sector debt and inflation-adjusted real estate prices.

“Our assessment of industry risk in Thailand's banking industry incorporates our opinion that competitive dynamics will likely remain stable over the next three years, with a few large banks dominating the market.

“We believe that some degree of market distortion exists, mainly arising from unfavourable competitive distortions from nonbank competitors. A large proportion of highly stable core customer deposits support Thailand's industry profile.” www.standardandpoors.com (ATI).