Jada Wattanasiritham, president and CEO of Siam Commercial Bank, said yesterday that the high-interest campaigns for time-deposit accounts and a series of fixed-deposit interest rate hikes were aimed at stimulating those who keep their money in savings to shift it to time-deposit accounts.

"In recent years, interest rates for savings and fixed-deposit accounts were quite close at 0.75 per cent and 1 per cent and this made money flow into savings accounts. The ratio of savings to time-deposits is unbalanced," she said.

Her bank's savings balances exceed 50 per cent of all deposits and the bank wants to lower this to 30 per cent, although that would be impossible to achieve this year. Banks were also trying to pull back money that left their deposit accounts for investment in mutual funds, she said.

The flow of deposits in the banking system to mutual funds amounted to Bt300 billion-Bt400 billion last year. Siam Commercial Bank alone lost Bt100 billion to the money market, Jada said.

"Like pricing, interest rate movements depend on liquidity, opportunities to lend money and competition. Banks compete [in attracting deposits] not only with each other but also with mutual funds and other investments such as debt instruments. Interest rates nowadays are moderate and better than the ultra low level of the past," she said.

Tak Bunnag, executive vice president of Bank of Ayudhya, said his bank bumped up interest rates to keep its depositor base.

"We have the same group of depositors as Siam Commercial Bank. When they increased their deposits, we had to follow suit even though liquidity remains. Our savings accounts represent 30 per cent of the bank's total deposits," he said.

Bank of Ayudhya said that as of today it would pay 25 basis points more in interest on savings accounts with balances over Bt20 million, and on three-, six- and 12-month time deposit accounts. Its lending rates were also jacked up by 25 basis points.

Boontuck Wungcharoen, executive vice president of Kasikornbank, said commercial banks need to finance loan expansion for the rest of this year. The loan-to-deposit ratio at some banks has already passed 90 per cent, which signals the time for rate hikes.

"It's normal that lending will grow much faster in the second half than the first half of the year. So banks have to raise funds by increasing deposit rates," he said.

Kasikornbank's loans grew only one per cent in the first half of the year, against last year, which was much lower than the bank's whole-year target of 6.9 per cent. The bank's lending target for SMEs was set at 16 per cent this year, but SME loans rose by only 4.5 per cent in the first half.

Jiwamol Kanoksilp,

Piyarat Setthasiriphaiboon

The Nation