Some major Thai banks up loan loss reserve, walling up against bad debt

By Pooky; 4/20/2013

Some major Thai banks are concerned that over cheap home loans leading to speculation and soaring property prices, will spell bubble. Thailand’s booming banks, most reporting rock solid earnings growth of 5% to 15%, are warily watching for signs of a credit bubble, even as they rake up record profits on robust loan growth. Bangkok Bank, Thailand’s largest lender by assets, said yesterday it had raised its loan-loss reserve coverage to 203.3 per cent of nonperforming loans (NPLs) in the first quarter, more than double the central bank’s minimum requirement. The Bank of Thailand, instead of targeting specific segment such as real estate loan, has cautioned banks overall on rising household debt in South-east Asia’s second biggest economy and expressed concern that cheap home loans could cause a steep rise in prices similar to that seen in Singapore and Hong Kong. Thailand’s capital Bangkok, for example, was rated in the top 15 globally, on real estate value appreciation. The country’s leading private lenders say there are not worried about a property bubble, but concede there is a possible excess supply of condominiums along Bangkok’s mass transit routes. Most economist says the massive inflow of foreign funds into Thailand, is causing excess liquidity that is driving most of the speculation in Thailand. The Thai central bank has resisted lowering interest rate to stem that inflow of foreign fund, arguing lower rates, will spur speculation (Source).

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