Banks fear lower loan growth

Economy February 03, 2014 00:00

By Sucheera Pinijparakarn,

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Banks may lower their growth forecasts for some loan segments because the prolonged political disturbance has affected loan demand, while the delinquency rate may increase.

Anuwat Luengtawekul, chief financial officer of Thanachart Bank, said it was monitoring the political unrest to see how seriously it affects its customers. The bank will wait a month or two before deciding whether to revise its loan-growth targets.

Currently, TBank targets loan growth of 6-7 per cent this year.

He said the political tension was affecting corporate and retail customers’ loan demand. The delinquency rate has a high chance of increasing.

“We have to work together with our customers to help them get through tough times. Furthermore, we have to improve some segments where we have little market share, such as mortgages and SMEs [small and medium-sized enterprises]. In those areas that are unable to drive loans, we will focus on fee income such as from cash management,” he said.

The bank has short- and long-term plans to maintain growth.

“We are looking after our operating costs as a short-term plan. If the political unrest continues even after the general election, the bank will consider adjusting its business plan,” he said.

Adisorn Sermchaiwong, senior executive vice president at CIMB Thai Bank, acknowledged that the political unrest had seriously affected its retail lending, especially personal loans and mortgages. It is considering lowering its projection of new loans in those two categories after the general election.

Earlier, CIMB Thai projected new personal loans of nearly Bt10 billion, but after one month of the new year, he believes they might not pass last year’s figure of between Bt8 billion and Bt9 billion.

The bank has increased the frequency of debt collection after the delinquency rate of personal-loan customers climbed by 1-2 per cent. At present, the rate of non-performing loans in the personal-loan segment at CIMB Thai is 2-3 per cent.

Wealth products

To maintain growth in the retail-banking sector, CIMB Thai is chasing fee income by promoting wealth products to its customers.

Adisorn said the political uncertainty had affected deposit mobilisation in the first month |of this year, but the bank would launch further campaigns for deposit products as this would lead to cross-selling.

“We aim to launch a 24-month time deposit with the possibility [of an interest] rate of more than 3 per cent [per annum]. The long period is to ensure that the customers stay with the bank until we can offer other products,” he said.

Meanwhile, the state-owned bank Government Savings Bank may also cut its loan-growth target as the prolonged political unrest hits public investment.

GSB president Worawit Chalimpamontri said the bank forecast that lending this year was unlikely to reach previous projections, especially state and corporate loans, which have slowed after the dissolution of Parliament.

At the end of last year, the bank projected deposit and loan growth in 2014 of 1.5 times gross domestic product, while projecting |GDP growth of 4 per cent. Worawit said it now appeared that GDP growth would be dragged down, and its loan growth would decline as well. However, the |bank will evaluate the overall economy again before revising |its growth targets next quarter.

GSB has projected new loans of between Bt80 billion and Bt90 billion this year.

In general, the bank targets loans for state projects at 20 per cent of total new lending, but it will try to shift its focus to other segments as it is not confident of the political direction or when the new government will be formed after the election, he said.

Indicators presage an economic slowdown this year. Bank of Thailand Governor Prasarn Trairatvorakul has suggested GDP growth could be below 3 per cent. Meanwhile, exports and private investment are unlikely to recover from 2013 levels.

Worawit said GSB would set higher loan-loss provisions than last year given the high risks the country is facing, and these higher provisions could pull down its profits as well.

Last year, GSB showed profits after loan-loss provisions of Bt22 billion, while non-performing loans were 1.14 per cent of the total.