Other banks, including Kasikornbank, are expected to soon follow the trend, which reflects intensified competition between banks to attract deposits.

 State-owned KTB announced it would today increase its interest rates for time-deposit accounts and lending by 25 to 50 basis points, the same rates as BBL.

 KTB's fixed three-month deposit rate will rise to between 3 per cent and 3.75 per cent, six-month to between 3.25 per cent and 4 per cent, 12-month to between 3.5 per cent and 4.25 per cent and 24-month to 4.25 per cent. The range of interest rates in each case depends on the amount on deposit.

 The bank's minimum lending rate (MLR) was increased to 7.25 per cent from 7 per cent, the minimum overdraft rate (MOR) to 7.5 per cent from 7.25 per cent and the minimum retail rate (MRR) to 7.75 per cent from 7.5 per cent.

Siam Commercial Bank's lending and deposit rates are to increase by 25 basis points, taking effect tomorrow. The bank's three-, six-, and 12-month rates will increase to between 3 per cent and 3.75 per cent, between 3.25 per cent and 4 per cent, and between 3.75 per cent and 4.5 per cent, respectively.

Its MLR will be increased to 7.25 per cent, MOR to 7.5 per cent, and MRR to 7.75 per cent.

The Bank of Ayudhya (BAY) only raised its three-, six- and 12-month time-deposit rates, by 25 basis points each, with retroactive effect from Tuesday. It left its lending rate unchanged.

BAY's MLR is now the same as the larger banks, at 7.25 per cent, while its MOR and MRR, staying at 7.75 per cent, are still 0.25 per cent higher than the larger banks.

TMB Bank announced that it would increase by 25 basis points both its loan and deposit rates today.

Bangkok Bank (BBL) spearheaded the fifth interest-rate hike since September last year when it raised its time-deposit rates by between 20 and 25 basis points. The move surprised observers because the announcement came only one week after it had hiked rates.

A Bank of Thailand (BOT) senior official said the series of interest rate hikes by commercial banks could be attributed to intensified competition in a bid to lock in long-term costs of funding amid upward interest rate trends.

 Kasikornbank, the country's third-largest bank, will consider an interest-rate rise at a meeting today.

 TMB Bank's chief executive, Subhak Siwaraksa, said that since early this year commercial banks had raised rates higher and more quickly than expected, to align with global market trends and Thailand's 14-day repurchase rate.

 He said the US Federal Reserve would possibly raise its policy rate another two times this year and the Bank of Thailand was expected to follow suit, as the central bank aims to raise its key rate until the real interest rate enters positive territory midway through the year.

 "One main factor in the fast interest rate hike trend is tougher competition in the banking industry. At the same time, liquidity has been absorbed," Subhak said.

He predicted that domestic interest rates would peak around the second half of this year and gradually decline after that.

Somruedi Banchongduang

The Nation

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Loan-to-deposit ratio down

The loan-to-deposit ratio of Thai commercial banks in January declined to only 87.96 per cent, the lowest in 16 months, amid competition for deposits.

The ratio has not been this low since August 2004 when it was 87.84 per cent reflecting low lending compared to deposit increases.

In December last year, the ratio was 90.9 per cent.

Tongurai Limpiti, senior director of the central bank's Financial Institutions Policy Group, said yesterday that the lower ratio was partly due to investors waiting for the political uncertainty to clear up before making decisions to seek loans. In addition, banks are boosting their deposits by raising deposit rates to lock in long-term costs of funds.

"Now lending has ground to the halt," she said. "Investments have stopped to wait for the political situation to become clearer. But all banks have kept their lending targets."

Whether banks will be able to achieve their targets depends on several factors. Over the past two years, banks have missed their loan targets because of high oil prices, bird flu, the tsunami, and the southern insurgency.

Tongurai said banks were also increasing their deposit bases to lock in long-term funding costs. This reflects their plans to expand lending significantly in the future.

The loan-to-deposit ratio was once boosted to as high as 143.26 per cent at the end of 1997 when Thailand was hit by a financial crisis.

Meanwhile, the central bank will launch the last draft of banking regulations regarding Basel II, the new international banking standard for risk management. In June, banks will have to inform the Bank of Thailand about their choice of standards between the standardised approach and a so-called internal ratings-based approach. The former is a less complicated method.



Anoma Srisukkasem, The Nation