Commercial loans and many types of retail loans grew at a slow pace while SME loans did not recovered in June. This caused June net loans overall to increase only THB10.7 billion or 0.09 percent MoM. When compared to the same period of last year, June net loans expanded at the sluggish pace in almost one year and a half of just 3.88 percent YoY. However, when compared to the end of 2018, net loans leaned towards 1.0 percent growth YTD.
Meanwhile, deposits contracted steadily by THB62 billion or 0.49 percent MoM in June due to the maturity of special deposits, with high interest rates at several large commercial banks and efforts of some banks to align their deposits with loans. As a result, June deposits overall slowed to 3.0 percent YoY, representing the lowest growth in over two years since May 2017.
The loan-to-deposit+borrowing Ratio increased to 92.60 percent in June, over 92.36 percent recorded in May, reflecting profitability and cost management of commercial banks amid their efforts to mobilize liquidity via many channels, including deposit and debenture issuance. As a result, the loan-to-deposit+borrowing ratio in June was lower than the 92.71 percent reported for the end of 2018.
We at KResearch view that commercial banks may offer deposit products, with terms and formats that are more suitable to the recovery in loans and maturing deposits during 2H19 in order to ensure that their liquidity and financial cost management remains efficient.
Regarding the loan outlook for 2019, KResearch projects that loans of commercial banks registered in Thailand may grow 4.5 percent, declining from the 5.7 percent pace recorded in 2018 because loan drawdown did not recover much during 1H19, in particular commercial loans. Moreover, retail loans that performed well during 1H19 may slow in 2H19 because special factors supporting retail loans, especially home and auto hire-purchase loans, will probably fade out. However, such a slow loan growth is consistent with the Thai economic performance projected for 2019.