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26 Feb 2019

Financial Institutions

Net loans in Thai commercial bank system in Jan 2019 decelerate during the business loan repayment season (Business Brief No.3790)


KResearch summarizes the information about loans, deposits and financial liquidity at 14 Thai commercial banks as of the end of January 2019 based on the Summary Statement of Assets and Liabilities with highlights as follows:

  • Net loans declined due to seasonal factors as this was the loan repayment period for the business sector and small and medium-sized enterprises (SMEs). In addition, commercial banks were still worried about the quality of SME loans after non-performing loans for SMEs in 2018 increased over-year. Due to the deceleration of corporate loans and SME loans in January, total loans outstanding dropped by THB60 billion or 0.52 percent MoM. The decline was evident at almost every commercial bank.
              Retail loans continued to expand, driven by housing and auto loans, which account for a majority of the portfolio. For housing loans, buyers and sellers were speeding up the ownership transfer before the Bank of Thailand's macro prudential measures governing housing loans take effect in April. Hence, the momentum of housing loans is expected to continue in the next two months. Meanwhile, auto loans were buoyed partly because of vehicle bookings during Motor Expo and purchasing orders late last year; the ownership transfers of these auto purchases are expected in early 2019.  Meanwhile, credit card loans and personal loans decelerated in line with the loan repayment period.
  • Deposits in January 2019 increased thanks to the deposits by the government sector and special deposit campaigns introduced by some commercial banks. Although some banks raised fixed deposit rate by 0.25 percentage points this month, such a rate hike has not evidently altered the commercial banks' deposit base. Total deposits outstanding increased over THB70 billion or 0.59 percent MoM, mainly because of a rise in deposits at two large commercial banks where  the government sector parking funds in their current accounts and savings accounts. In addition, some commercial banks have launched special short-term savings campaigns to attract customers, while some small banks enjoyed an increase in deposits due to their long-term special savings campaigns.
  • Financial liquidity at Thai commercial banks in the first month of this year improved from the previous month.  When considering the amount of hastily-approved loans early this year among certain groups of customers, KResearch reckons that the financial liquidity of commercial banks will not be the key factor leading to competition in deposit rates and pushing fixed deposit rates of the entire banking system.  Nonetheless, the timing for overall rate hikes still depends on signals from the Bank of Thailand and the assessment of economic and investment sentiments after the general election.
              LTD +borrowings in January 2019 dipped to 91.88 percent from 92.71 percent in December 2018 while liquidity to asset ratio (LTA) inched higher to 21.51 percent from 21.00 percent in December last year.

Financial Institutions