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Published on September 25, 2007

President Kannikar Chalitaporn yesterday said that although the SCB Group had set a target of 20 per cent for lending growth this year, the rate during the first eight months was only about 10 per cent. Auto-leasing loans made by subsidiary SCB Leasing had fallen well below their growth target, because of the general slowdown in the country's car sales.

However, despite the bank's lending performance falling short of its own targets this year, both its car loans and total loans have grown at a better rate than the industry average, Kannikar said. The banking industry generally had only single-digit loan growth in the first eight months.

"We set a loan-growth target for the SCB Group this year at quite a high level, estimated from our high base in the previous year of 22 per cent," she said. "Next year, we won't set a goal that is so aggressive. It will be lower than 20 per cent, although the country's economic outlook is expected to improve next year."

Kannikar said a clearer picture of the country's political situation would be the key positive factor for Thailand's economy next year. A new government should be formed next year following an election scheduled for December 23. This will build up people's confidence, she said.

Kannikar's comments are similar to those of Kasikornbank CEO Banthoon Lamsam, who said the Kingdom's economy would recover once the new elected government was set up.

The resulting positive environment will boost both consumption and investment, including investment to expand the banking industry, he said.

The Kasikornbank Group is considering possible business expansion next year, but this will also be based on risk management, Banthoon said.

Meanwhile, Moody's Investors Service also considers that the outlook for Thailand's banking system remains stable. It has made no new downgrades of the 12 banks on which it assesses ratings, despite the slowdown in the Kingdom's economic growth and the impact of the coup on the agency's expected pace of upgrades.

"Any protracted and significant slowdown in the economy could weaken the ability of Thailand's banks' to further improve profitability and reduce the level of non-performing assets," said Moody analyst Karolyn Seet. "These are both key factors in strengthening their recovering capital bases.

"In addition, most banks still have high gross-non-performing-loan ratios of more than 9 per cent, but this represents only part of their impaired assets. Large balances of restructured loans and foreclosed properties raise questions about the adequacy of reserves at most banks.

"However, retention of growing earnings has restored solvency and over the next year or two will restore capital adequacy at all of the banks."

Moody's said the effects of the US sub-prime mortgage crisis on Thai banks would also be limited, since exposures at banks rated by the agency were zero or immaterially small and posed no threat to either their creditworthiness or their liquidity.

Provisioning charges should speed up in the short term, but economic solvency should improve in the long term, while banking assets of 112 per cent of gross domestic product also indicate the important intermediation role banks play in the economy, the agency said.

Somruedi  Banchongduang

 The Nation