The Bank of Thailand published its quarterly assessment of banking sector conditions, indicating the Thai banking system remains resilient with robust capital, loan loss provisions and liquidity, even as credit growth continues to contract and profitability has weakened. System-wide loan growth for licensed banks and their subsidiaries contracted by 1.0% year-on-year in the third quarter of 2025, reflecting continued declines in SME and consumer lending amid heightened credit risks, while lending to large corporates expanded slightly alongside weaker loan demand and continued debt repayments. Overall loan quality (non-performing loans (NPLs) or Stage 3) remained broadly stable as new NPL formation moderated, with outstanding Stage 3 loans declining to THB 544.0 billion, although the NPL ratio rose to 2.94% partly due to a shrinking loan base. Stage 2 loans increased, including qualitative classification changes for a few large corporates and, to some extent, improved classification from Stage 3, lifting the Stage 2 ratio to 7.24%; commercial banks continued to provide borrower assistance and manage portfolios. The update highlights the need to closely monitor tight financial conditions and SME and household debt serviceability amid a slowing economic environment, partly linked to U.S. tariff measures and subdued income recovery. It also notes that the “Khun Soo, Rao Chuay” program has helped ease debt burdens for SMEs and vulnerable households, while household and corporate debt-to-GDP ratios declined in the second quarter of 2025 alongside slower credit expansion and reduced new borrowing; corporate profitability weakened across most sectors, particularly real estate, in line with subdued housing market conditions.

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