"Both issues continue to have relatively high uncertainties," Nawaporn Maharagkaga, a senior director, said yesterday.

"Banks need risk management that allows their customers to operate their business so that they can make payments.

"Risk management should be proper" for the situation, he said.

However, the banking system remains strong with good risk management and the payment system is operating as usual, although with some difficulties for users in some flooded areas. "Now, we can face this situation with a strong and functioning banking system. This can support the economy to continue without disruption."

It is too soon to estimate the rate of non-performing loans (NPLs) and loan growth this quarter, as they depend largely on the speed of business recovery, he said.

As of last quarter, the commercial banking system was carrying NPLs worth Bt268.5 billion, down Bt16.2 billion from the second quarter. Gross NPLs stayed at 2.8 per cent and net NPLs at 1.4 per cent of outstanding loans.

Corporate NPLs fell to 3.1 per cent, SME (small and medium-sized enterprise) NPLs to 4.2 per cent and consumer NPLs to 2.0 per cent.

According to BOT statistics, the loan exposure was about Bt121 billion, or 1.5 per cent of total outstanding loans in the system, in the seven inundated industrial estates in Ayutthaya and Pathum Thani and businesses in heavily flooded Nakhon Sawan and Lop Buri.

About three-fourths of these loans were extended by local commercial banks and one-fourth by foreign banks.

Many flood-hit companies "have relatively strong business fundamentals", Nawaporn said.

"Some use funds from their parent companies to finance plant construction and some have immediate injections from their parent companies, not borrowings," he said.

This quarter might not see loan growth as strong as the previous quarter as businesses need to wait until the floods recede, while local banks will likely focus more on support for production rather than fund mobilisation.

After the floods retreat, "there could be some loans for restoration and imports of immediate inputs, and these depend on the speed of recovery and build-up of customer confidence", he said.

In the third quarter, the commercial banking system saw increases in loans of 17.3 per cent year on year and 15.1 per cent from the second quarter. Corporate loans grew by 18.2 per cent, SME loans by 16.5 per cent and consumer loans 17.4 per cent.

Deposits including bills of exchange rose 13.6 per cent year on year and 14.1 per cent quarter on quarter.

System liquidity was slightly tighter as loans grew faster than deposits. The loan-to-deposit ratio, including B/Es, rose to 89.7 per cent.

The commercial banking system's capital-adequacy ratio, ac-cording to the Bank for Interna-tional Settlements, improved to 15.7 per cent, while the Tier 1 ratio was 12.4 per cent.