Determinants of Non-Performing Loans in Licensed Commercial Banks in Thailand

Abstract

This article aimed to (1) study the general characteristics of loans and non-performing loans of commercial banks in Thailand, (2) examine the factors that affecting non-performing loans of commercial banks in Thailand. The sample groups used in the research include four commercial banks in Thailand; Kasikorn bank, Siam commercial bank, Krungthai bank, Bangkok bank quarterly basis from first quarter 2013 to forth quarter 2022. The result of the study found that: the amount of loan and non-performing loans of commercial bank in Thailand has been an increasing trend. The analysis of factors significantly affecting the volume of NPLs in commercial banks in Thailand, using Fixed Effect and Random Effect analysis methods, revealed that the significant factors are the loan growth rate and the unemployment rate, which have a positive relationship with the volume of NPLs. Conversely, the GDP growth rate, lending interest rate, and the COVID-19 pandemic have a negative relationship with the volume of NPLs. Furthermore, the study found that the return on equity (ROE), return on assets (ROA), loan-to-deposit ratio, and operating expense to total revenue ratio have no significant relationship with the volume of NPLs in commercial banks in Thailand.