Bank chief also announces that the payment deadline for November is extended for four days and that National Credit Bureau data will not be sent this month after mobile payment platforms crashed in Thailand this week. Chatchai Sirilai also said the take up of the bank’s mobile application was behind schedule because of the current economic recession but predicted a million users sometime in the first quarter of 2021 from 800,000 now. 

Thai state home loan lender, GH Bank, is warning that its profits will be hit this year by over ฿4 billion after a non-performing loan provision of ฿4.5 billion was provided for based on an assessment of the latest payment moratorium scheme to address the ongoing Covid 19 economic crisis.

Chief Executive and President of GH Bank, Chatchai Sirilai, has confirmed that a further ฿4.5 billion for non-performing loans is to be made in the institution’s 2020 accounts which will hit the state bank’s profits for the current year. It comes as the bank has expressed concern for ฿9 billion of outstanding debt in its review of its current debt moratorium scheme which ends on January 31st 2021.

Despite some improvement in the economic situation reported by the government in recent weeks, the latest news from the Government Housing Bank shows the extent of the economic recession that Thailand is still facing and the key problem of massive household debt which currently overburdens a majority of Thai homes and families.

By the end of the year, it is forecast that Thai households will owe, combined, as much as 90% of the country’s GDP. This figure was confirmed at nearly 84% in June and appears to have risen from 73% in March which was the baseline confirmed by the National Economic and Social Development Council (NESDC).

Ballooning household debt in Thailand

A survey, last year, showed that over 88% of Thai households had some form of debt. Over 59% of these reported formal debt with an average outstanding balance of ฿340,000 and loan repayments of over ฿15,000 per month. The balance of indebted households or 40% reported informal debt and repayments of ฿5,200 per month.

Significantly, a survey in March this year by Kasikorn Research Center showed that Bangkok’s households had a lower level of debt with only 44% reporting the condition. 

However, the figures this year, nationally, show an alarming rise in the level of debt per household since the initial Covid-19 shutdown.

This is why GH Bank has announced an extra provision for ฿4.5 billion for non-performing debt which will directly impact the bank’s bottom line.

Current moratorium scheme extends to ฿90 billion of debt with roughly 10% of borrowers in difficulty

Details were given to the press by the bank’s President Chatchai Sirilai. He explained that the latest moratorium scheme on debt repayments, which runs up to January 31st 2021, involved up to ฿90 billion in outstanding loans.

The bank has determined that approximately ฿9 billion of this debt relates to customers whose economic and financial situation is perilous and has, accordingly, estimated that ฿4.5 billion may become non-performing.

Reserve provision of ฿4.5 billion for non-performing loans brought in to this years’ accounts as a hit

Consequently, a reserve provision for this amount has been set up in this year’s accounts which will impact the bank’s financial performance for 2020.

‘About ฿9 billion is owed either by customers in a fragile group or those who have registered for the longest moratorium period allowed,’ Mr Chatchai explained. ‘We estimate that half of these loans, or ฿4.5 billion, will eventually become NPLs.’

The bank boss said that this would mean the projected profit for 2020 will fall from somewhere in the region of ฿13 billion currently projected to ฿9 billion after the adjustment.

Previous moratorium scheme of ฿275 billion

Mr Chatchai also referred to the bank’s previous moratorium scheme which spanned a massive ฿275 billion and revealed that 87% of borrowers had completed all payments with a remaining 8.7% who made partial payments. This left a balance of 4.3% or ฿11.82 billion which was not repaid.

Mr Chatchai described this scheme, which ended in October, as a ‘positive outcome’ when he briefed the media.

Problem this week with payments on mobile banking platforms that crashed leading to an extended end of month repayment deadline for all borrowers

He also addressed a problem, this week, when the mobile application platforms of Thai banks crashed. 

Because of this, he said that the bank had extended repayments, due by the end of November, until December 4th and this month, had suspended all data being sent to the National Credit Bureau so that its customers’ credit score would not be adversely impacted.

Mr Chatchai acknowledged the current recession and said this is why the bank’s newly launched mobile payments application has, so far, only generated 800,000 users out of a target of 1 million set for the end of the year. The bank has, therefore, extended its target into the first quarter of 2021.

Established in 1953 to help the less well off

GH Bank was established in 1953 under the Government Housing Bank Act approved by King Bhumibol Adulyadej in an order published in the Royal Gazette on the 29th of January that year.

The bank loans money to Thai nationals seeking to finance new homes and was initially designed to provide this service to Thais with lower incomes.

The financial institution has outstanding loans in excess of ฿1.3 trillion. In recent years, it has moved towards the higher income market with loans of up to ฿8 million whereas the broader range of loans advanced are still for amounts of approximately ฿2 million.

The bank is a Thai success story and is owned by the state as a state organisation regularly contributing profits to the treasury which is passed on and made available as part of the government’s budget.

Get all our latest stories, follow Thai Examiner on Facebook here

Further reading:

Virus impact creeps further into the financial system with a 40% drop in bank profits now projected for 2020

Glimmer of hope for the ailing Thai economy as exports and business registrations decline slows

Central, Robinson department stores in expansion mode showing 2020 economy is not all bad news

Economy to contract by 10% as Bank of Thailand helps home borrowers facing stifled incomes save interest

Pragmatic economic policy aims to keep things ticking over until exports and tourism reawaken in 2021

Business, economic experts call for less emphasis on tourism and exports with higher taxation levels at home

New cabinet lineup in Royal Gazette but economic damage now extending into parts of the property market

Warning signs in new banking and employment reports as virus crisis hits Thailand’s bottom line hard

Thailand may have to live with the virus but can recover in two years says outgoing central bank chief

June export figures show a 23% decline on last year but the economy will recover by end of 2021

Prime Minister indicates that the cabinet reshuffle will be complete very shortly with no problem

Somkid ready to bow out of government as September cabinet reshuffle seems to be on the cards

Plans to relaunch tourism from China thrown out as conflicting reports emerge of a new swine flu virus threat

Election of a new ruling party leader, shifts focus now to the future of the economics czar Somkid and his team

Banks ordered to cease dividends and shore up balance sheets on fears of loan quality erosion due to slump

Thai economy in even greater peril as Covid 19 shutdown appears to have had a bigger impact than expected

Election of Prawit as Palang Pracharat leader will see more grassroots politics in government

Emergency decree extended by Thai government but politics behind the scenes abuzz with PPP party heave

92% of suicides due to the virus are among the self-employed according to expert research group in academia

Government moves to clarify that it is not seeking cash from the kingdom’s richest business leaders in overture

Pheu Thai MP calls on Prime Minister to resign as index shows a collapse in business confidence to a 9 year low

Polls show the public becoming more polarised as Deputy PM assures public there is nothing to worry about