Loan quality continues to sag

Bad debt firms eager to cash in

- SOMRUEDI BANCHONGDUANG

Asset management companies (AMCs) expect roughly 50% of special mention (SM) loans to continue to deteriorate into nonperforming loans (NPLs) over the next three years.

SM loans - defined as debt overdue for more than 60 days but not exceeding 90 days - amount to 1.25 trillion baht in the entire banking system. Of this amount, 849 billion baht comes from business loans, while the remaining 402 billion originates from the household sector, according to Rak Vorrakitpokatorn, chief executive of Bangkok Commercial Asset Management (BAM), the country's largest AMC.

"If the Bank of Thailand's debt relief measures expire, around 50% of SM loans could turn into NPLs," he said.

"As a result, a substantial volume of bad debt may be transferred to AMCs over the next three years."