Net loans in the Thai commercial banking system (14 commercial banks) grew THB26.4 billion to THB11.34 trillion in August, rising 0.23 percent MoM or 5.85 percent YoY. The increase was supported by all types of retail loan while SME loans began to recover somewhat. However, because there were still business loan settlements, net loans rose only marginally in August. Meanwhile, deposits contracted from the previous month by THB25.3 billion or 0.21 percent MoM to THB12.27 trillion, led by CASA deposits. As a result, deposit growth slipped to 4.73 percent YoY and 1.43 percent YTD. Liquidity in the commercial banking system also tightened as evidenced by the ratio of net loan to deposit, plus issued debt and borrowing (LTD+Borrowing Ratio) that edged up to 87.63 percent, over 87.23 percent reported for July.
Regarding 2018 loan growth overall, we at KResearch project that loans extended by 19 domestically-registered commercial banks will grow over our projection band of 4.8-5.3 percent, driven chiefly by all types of retail loan. Hire-purchase loans will likely be supported by new car sales that are expected to exceed the original target. Credit card and personal loans are expected to thrive, thanks to seasonal factors. Home loans will likely be driven by accelerated transfer of home ownership while SME loans will continue to pick up. The government's accelerated disbursements of investment budget toward the yearend will also help spur business loan growth and mitigate the impact of debt repayments by large borrowers.
However, close attention must be paid to domestic consumption and retail loans ahead amid signals from the Bank of Thailand to raise its policy rates and tighten mortgage lending criteria. The central banks is scheduled to hold a meeting with relevant agencies in 4Q18 to find ways to control systematic risk and speculation that could lead to a bubble in the property business, especially urban condominium market.
Looking into the remainder of 2018, it is expected that pricing competition will be restricted while banks will continue to ensure that their financial costs are in alignment with incomes. They will likely also attach importance to enhancing their capacities to reach new customers via electronic channels in order to expand their business opportunities later on.