Bank of Ayudhya’s profitability recovers to pre-pandemic levels

Bad loans are expected to stay at a ratio of 3% over the next 12 to 18 years.

Bank of Ayudhya’s asset quality is expected to remain largely stable over the next 12 to 18 months, according to Moody’s Investors Service.

“Thailand's improving economic conditions, coupled with BAY's strong loan-loss reserves that cover more than 1.5x of its problem loans, will support the bank's asset quality,” Moody’s said.

The bank’s problem loan ratio is expected to stay at around 3% over the next year and year and a half.

The bank’s profitability has recovered to pre-pandemic levels, the ratings agency noted, supported by the bank’s market leadership in high-yielding segments that include auto loans, personal loans and credit cards.

Its return on average assets, after removing one-off gains, increased to 1.2% in 2022 from 1% a year ago. This was thanks to an increase in the bank’s net interest margin and decrease in its loan loss provisions.

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The bank’s retail and small and medium-sized borrowers, however, present a key risk for the banks.

These two segments constitute the bulk of Bank of Ayudhya’s loans under debt relief programs. These segments account for around 8% of the bank’s total domestic loans.

On the upside, the bank’s funding will likely remain stable, thanks to its strong domestic franchise in Thailand as well as access to credit lines from its parent, Japan’s MUFG Bank.

The bank is also noted to maintain an adequate liquidity buffer, at more than 24% of its total assets as of 31 December, Moody’s said.