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25 Jun 2018

Financial Institutions

May Net Loans Grew Steadily MoM while Deposits Fell Slightly (Business Brief No.3749)


             Net loans for May increased to almost the same level as that in April by THB65.9 billion, or 0.59 percent MoM to THB11.20 trillion. When compared to the same period of 2017 and at the end of 2017, May net loans grew 4.99 percent YoY, or 1.27 percent YTD due to the low base of last year. The increase was seen almost across all banks in line with growth in business loans, in particular for large and small businesses. Retail loans were supported by auto hire purchase and home loans.

          Deposits slipped slightly from April by THB700 million, or 0.01 percent MoM to THB12.36 trillion. When compared to the same period of 2017 and at the end of 2017, May deposits grew at almost the same pace as that reported for April at 6.32 percent YoY and 2.16 percent YTD. The MoM decline in May deposits was seen in all types of deposits (current, savings and fixed deposits) at two large banks despite the introduction of seven new special deposit products by small banks. Meanwhile, there was an increase in borrowing within the banking system to almost the same level as deposits that declined in May. However, due to steady loan growth, liquidity in the banking system tightened only slightly as evidenced by the ratio of gross loan to deposit, plus issued debt and borrowing (LTD+Borrowing Ratio) that rose to 85.95 percent over 85.51 percent recorded in April, and the liquid asset to total asset ratio that dropped to 22.30 percent from 22.45 percent reported in April.     

            During 5M18, loans overall were supported by the better-than-expected economic growth. As a result, there was more demand for business loans from large companies. Retail loans were driven by auto hire-purchase loans (after the expiration of the five year minimum time required for continuous single-ownership of vehicles bought under the first-time car buyer program). Home loans also grew in conformity with the growing number of newly built/ready to move in homes. SME loans, however, saw relatively static growth although some enterprises, especially medium-sized SMEs, have shown recovery signs. Given this, we at KResearch expect that loans will grow over 5 percent during 1H18; thus, overall loan growth for 2018 will likely be higher than our existing forecast of 4.8 percent though close attention must be paid to external risks stemming from heightened trade retaliations. Also, a high base for 2H17 may shave 2H18 loan growth.

​            Regarding bank deposits for 2018, although banks are bracing for an upturn in interest rates, current and savings deposits in the banking system will likely increase steadily ahead. This is thanks to the development of electronic banking channels and the cancellation of basic fees for retail financial transactions that have induced more people to use online funds transfer, top-up and bill payment services. Greater convenience in conducting financial transactions, which will help banks manage their deposit costs more efficient, sustain their net interest margins and extend more loans, may offset the decline in their fee income somewhat.