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Thai banks still stuck in NPL gridlock

The traffic may have eased a little in Bangkok since the crash, but there is still gridlock in Thailand's banking system.

The banks are stuck with a mountain of non-performing loans they would dearly love to offload, and there are plenty of buyers prepared to snap up bargains at attractive discounts.

The problem, as ever, is price.

DBS Thai Danu Bank recently offloaded distressed assets with a nominal value of Bt31 billion ($756 million), selling them for a mere Bt8 billion - a 74% discount to face value. The deal was heralded by Bangkok analysts as a useful benchmark to the real state of the industry's NPLs, on which the Bank of Thailand's detailed statistics have been plentiful but increasingly meaningless, as notional restructurings and off-balance sheet manoeuvrings bring headline figures down, while underlying problems remain. NPLs were forecast by the government to fall below 20% by the year-end, against 31% at the end of August.

"The NPL Figures published are just an accounting facade. If you look at the real stuff, nothing has changed," says Wapan Wongpanit, head of research at SCB Securities.

On the face of it, Thailand should have all the makings of a thriving market in distressed debt, but things are not that simple, as the Thai Danu Bank deal demonstrated.

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