Krung Thai Bank expects to ride on the country's infrastructure mega-projects and public corporations to boost its government lending aggressively next year.

The country's largest state-owned bank has targeted growth in loans to the government sector of 12-15 per cent next year, double the targeted growth rate for the bank's total loan expansion, said first executive vice president Preecha Phukham.

KTB expects total loan growth of 6-7 per cent next year, or Bt60 billion, and loans to small and medium-sized enterprises are expected to be the main driver of that growth.

Preecha said the bank's main borrower would still be the Finance Ministry, which would use the funds to finance state organisations like municipal governments, universities, environment funds and training centres. The ministry will also use it for refinancing existing debts, in order to reduce the cost of funds.

The government's infrastructure mega-projects are expected to start next year. This will also support the bank's government loans and lending by the banking industry.

"We expect the government will mobilise funding from several sources, including bank loans, to invest in the mega-projects. For large projects worth at least Bt50 million, it is possible to raise funding from banks' syndicated loans. Thus, the prospective figure would boost KTB's government lending and the country's banking sector," he said.

However, Siam Commercial Bank president Jada Wattanasiri-tham recently said her bank had projected the government's mega-project investment would occur around next year's third quarter, so it would not support banks' lending significantly in 2007. As a result, loan expansion at banks is expected to come mainly from the private sector.

Currently, KTB's government-loan portfolio is 12 per cent of its total outstanding loans, constituting Bt100 billion. The bank expects the loan-product proportion will increase to about 15 per cent next year and outstanding loans to rise to Bt130 billion to Bt150 billion. Meanwhile, the bank's total outstanding debt is Bt900 billion.

So far this year, the bank has provided government loans of Bt60

billion, including Bt31.5 billion extended to the Finance Ministry.

Meanwhile, the government recently approved Bt165 billion worth of funding for three light-rail lines: Red, Blue and Purple. While the government has yet to decide which one to develop first, a Transport Ministry source expects it to be the Red Line, from Rangsit to Bang Sue.

In line with its sufficiency-economy philosophy, the government expects to develop the new mass-transit routes one by one, so as not to place too heavy a burden on the national budget.

Somruedi Banchongduang

 The Nation