S&P trims three Thai banks

S&P said it lowered its ratings on Siam Commercial Bank PCL and Kasikornbank PCL to BBB from BBB+ and on Krung Thai Bank PCL to BBB- from BBB. The agency also affirmed the BBB+ ratings on Bangkok Bank PCL and Bank of Ayudhya PCL.

“Systemic risk for Thailand's banks has risen and high leverage among borrowers is likely to persist for longer than we previously expected. Regulatory relaxation, such as a loosening of loan-to-value ratio requirements for mortgages, or an absence of any concrete action to rein in high household debt would delay a resolution of structural issues, in our view. In addition, the economic recovery remains fragile and uneven across sectors, especially in tourism, which remains well below pre-pandemic levels. The crisis in Ukraine could also further delay the normalization of international tourist arrivals in Thailand,” S&P said in a press release.

Government and central bank measures should lower risks for the banks, but will not eliminate them, the agency said.

“There is an increasing divergence in economic reality and reported asset quality ratios. The banking sector's reported nonperforming loan (NPL) ratio has remained relatively stable at about 3%, supported by ongoing relief measures. In our opinion, regulatory forbearance is just prolonging the pain of underlying problem loans. At 14%, the high proportion of banks' loan books under relief measures points to incipient problems in the system,” S&P noted.

The outlooks on the banks are stable.

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