Government Housing Bank (GHB), the largest mortgage-loan lender, yesterday cut its lending and deposit rates by 25 basis points, adding it would further lower rates if the central bank cut its policy rate again.

But the rate cut comes with tightening lending practices.

"We're probably the first bank to cut both sides of the rates, while commercial banks have so far cut deposit rates first," GHB president Khan Prachuabmoh said yesterday.

After the rate cut, the bank's minimum retail rate (MRR) was down to 7.50 per cent from 7.75 per cent, while other types of lending rates were also lowered by 0.25 per cent.

The central bank earlier cut its policy-signal one-day repurchase rate by 25 basis points from 5 per cent to 4.75 per cent, citing the economic slowdown, while the market anticipates further rate cuts by the central bank.

"If the central bank cuts interest rates again and we have enough liquidity, we would follow suit," Khan said.

However, he projected new lending this year would fall to Bt90 billion from Bt113 billion last year due to the economic slowdown and GHB's restructuring of lending practices.

 The new system will not allow managers of bank branches to approve loans. Branches will send information on loan applications to the headquarters, which would then approve the loans. This will solve the problem of each branch applying different standards for loan approval, a loophole in the system that prompted customers to head to branches where their applications  stood a better chance of approval.

The advantage of the new system is that managers and staff will have more time to seek new customers and serve them well, Khan said.

The bank will also seek new channels of long-term funding to reduce its dependence on deposits and promissory notes which account for 77 per cent of its funding, he said. Deposits are short-term funding, which don't match with long-term lending of mortgage loans of up to 30 years.

GHB may have to further discuss its securitisation plan with the Finance Ministry. Earlier, the ministry allowed it to issue securitised bonds worth Bt10 billion. Originally, the GHB had planned to issue securitised bonds this year worth Bt30 billion and Bt10 billion in the domestic and overseas markets, respectively.

However, the political uncertainty before the coup made it difficult to issue bonds. If the political situation is more stable and the central bank further relaxes its capital-control rule, the market is expected to welcome GHB's bonds, Khan said.

According to a pre-audit by the Office of the Auditor-General of Thailand, GHB's net profit last year dropped 21 per cent to Bt3.4 billion. Khan attributed this to too small a margin between lending and deposit rates, as the previous government did not allow it to raise lending rates. 

Wichit Chaitrong

The Nation