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Published on December 25, 2007

"We're expecting high competition for deposits among banks in the first quarter next year, as banks need more cash to lend and to prepare for the impact of the new Deposit Insurance Agency," said Woravit Chailimpamontri, GSB deputy director-general.

Bangkok Bank president Chartsiri Sophonpanich earlier forecast that deposit rates would increase by 25 to 50 basis points in 2008.

Woravit said the GSB would launch new financial products to attract depositors next year. The state-owned bank is finding it more difficult to find cheap funds than in the past, when it could easily attract depositors by issuing lottery-savings tickets. Now, depositors have more options to get returns on their money, so lottery-savings tickets have become less attractive, he said.

Some banks might be forced to offer a higher rate of return to attract depositors after the National Legislative Assembly recently passed the law to set up the Deposit Insurance Agency, he added.

Woravit is also concerned about non-performing loans (NPLs) rising next year due to the higher cost of living and the possibility of lay-offs.

The GSB will try to keep its NPLs at around 4 per cent of total outstanding loans of Bt463 billion this year, he said. The average annual profit of Bt10 billion in the past five years will be maintained.

 The bank will increase its lending rate as a last option, Woravit said, adding that higher deposit rates need not lead to higher lending rates.

 The bank will focus more on micro-finance, as the majority of its clients are retail borrowers.

GSB offers private mortgages of Bt700,000 to Bt800,000, as well as loans of Bt1 million to Bt2 million to small businesses.

Woravit said GSB was ready to support the new government in injecting money at the grass-roots level through the village funds, and to finance state infrastructure projects through syndicated loans.

Wichit Chaitrong

 The Nation