The bank loaned only Bt4 billion to 5 billion to corporations and small and medium-sized enterprises (SMEs), merely 2-per-cent growth in the first three months of the year, far below the Bt70 billion, or 15-per-cent growth, yearly target. The bank said the slow growth was due to seasonal factors and economic uncertainty.

Executive vice president Boontuck Wungcharoen said loan expansion was likely to improve in the second quarter and the bank hoped to achieve 7-per-cent growth. Although the Kingdom's economy has showed negative signs in the past three months, it is expected to recover once the interest rate is cut.

Kasikornbank has decided to maintain its loan-growth target on the assumption that the country's gross domestic product will grow 3-4 per cent for the year. Boontuck said that from now on, the country's economy would mainly be supported by interest-rate cuts, which would stimulate domestic consumption and investment. "If the policy signal rate is cut 50 basis points at next month's meeting [of the Monetary Policy Committee], it will reflect a real downward trend in interest rates. And it would be possible to boost banks' lending significantly," Boontuck said.

Nonetheless, he said the bank's corporate customers in the import and export sector had not shown any negative effects from the stronger baht. Normally, its impact would be visible about six months later. The bank always advises customers who have businesses involving foreign exchange to hedge their funds, but only half of them follow this. Boontuck said the bank's portfolio for import and export loans was about 40 per cent of total corporate and SME loans, of which 20 per cent had already hedged their funds.

Siam City Bank first senior executive vice president Lersuk Chuladesa said his bank's new lending in the first two months of the year was nearly Bt4 billion, compared with its full-year target of Bt30 billion to 35 billion, or 10-per-cent growth. The slow-down in loan expansion has been attributed  to political and economic uncertainty.

Siam City Bank will wait for a clearer picture before adjusting its business plans, especially the country's interest-rate move. If the Bank of Thailand reduces its rate significantly, consumer confidence will improve, and that will boost the bank's lending.

"Although the bank's lending in the first two months has shown quite low growth, it's too early to revise our target. We still see good prospects for the country's economy, and downward interest-rate trends will drive it." he said.

Somruedi Banchongduang

The Nation