Commercial banks are likely to face challenges mobilising deposits beginning next year as lower deposit protection will draw some liquidity to other sources, at the same time as the banks need to secure their deposit bases as the economy recovers.
Benjarong Suwankiri, head of TMB Analytics at TMB Bank, said the economy was gradually recovering on improved political stability and the state infrastructure spending that is expected to kick off next year. Lending for the infrastructure projects will require solid deposit bases, but in August next year the Deposit Protection Agency will halve its maximum to Bt25 million per depositor per bank.
“We expect more wealthy depositors who have more than Bt25 million in a bank will switch to other funds to seek higher returns,” he said.
After the DPA’s move next August, about Bt5 billion of commercial banks’ deposits will be uninsured. As a result, some of that money could move to specialised financial institutions (SFIs) or to mutual funds, including infrastructure funds.
Deposit mobilisation is likely to intensify after the Bank of Thailand last week revealed that the loan-to-deposit ratio at the end of June had risen to 98.3 per cent from 96.6 per cent at the end of last year. Deposits in commercial banks in the first half grew only 0.02 per cent to Bt10.23 trillion.
Benjarong believes savers may turn to attractive funds next year because apart from more infrastructure funds being launched to serve finance the state infrastructure projects, real-estate investment trusts will replace property fund, something that is likely to be welcomed by investors.
Initial public offerings for property funds grew by 15 per cent per year between 2008 and 2013, while other categories grew by 6 per cent on average.
Individual retail depositors who have more than Bt25 million in a commercial bank and don’t want to get into risky alternatives might turn to SFIs. These institutions are expected to mobilise funds aggressively to support the state investments, so liquidity next year is expected to get even tighter, he said.
Thanyalak Vacharachaisurapol, head of money and banking at Kasikorn Research Centre, said that once the deposit-protection cap drops to Bt1 million in 2016, that would be a major challenge for commercial banks because it will have a wide impact on their depositors. The banks should swiftly educate their clients on this and offer campaigns or financial products to secure their customer base.
“We have to admit that more factors will affect deposit mobilisation, but if these factors do not happen all at the same time, commercial banks can manage their funds, and Thai banks are well placed to cope with the economic recovery,” she said.