Thai banks mull offering relief packages for SMEs amidst rising economic woes

Non-performing loans for SMEs feared to rise.

According to Maybank Kim Eng, Patchara Samalapa, an executive vice-president at Kasikornbank (KBANK),
said the bank has nearly 100 SME customers, with a combined credit line of THB2.7b (from THB575b or 40% of total loan growth), and is calling support for them.

These customers are largely farming-related businesses whose cash flows have dried up due to the government's late payment to farmers under the rice pledging scheme. Note that the bank projects 10% SME loan growth this year.

Jiratchyuth Amyongka, senior executive vice-president of CIMB Thai Bank (CIMBT), said the bank is considering introducing relief packages for its SME customers by extending the grace period for both principle and interest
payments and provide additional working capital to support liquidity.

Here's more:

The above statements by the top management of KBANK and CIMBT are largely in line with our view. We are concerned about a potential chain reaction starting from the struggling SMEs driving up the system’s NPLs by 6% this year.

SMEs are by nature more sensitive to the deteriorating economic situation compared to large corporates. We remain cautious on the bank’s asset quality and already expect rising NPLs for SMEs and retail loans, assuming political situation will improve in mid-2014.

We forecast a sector NPL ratio of 2.84% and credit cost of 0.87% to total loans for 2014.