A month after the coup, the banking sector is seeing a recovery in consumer confidence and welcome signs of a rise in loan demand among SME clients.
Corporate clients, meanwhile, have been reviewing their investment plans after having dropped their previous ideas during the political turmoil. However, the actual injection of capital in this segment might take time, according to several bankers.
Before the May 22 coup, the banking sector had lowered its loan-growth target in line with the slowdown of credit demand across all sectors.
Since the coup, the situation has changed as consumers now have more confidence in the economy due to the National Council for Peace and Order (NCPO) having given priority importance to restoring economic growth.
State agencies and the banking industry are jointly offering measures to assist small and medium-sized enterprises by extending guarantees for SME loans from the prior 18-per-cent limit of the Thai Credit Guarantee Corporation to 50 per cent.
Major banks have offered supportive measures to SMEs by offering new credit and extending repayment periods to up to between six and 12 months, or by providing a grace period for the repayment of principal for up to six months.
Meanwhile, the Bt92-billion payments to rice farmers will help support commercial banks’ lending, as the NCPO has ordered the Finance Ministry to find Bt50 billion from financial institutions, on top of the Bt40 billion funding sourced from the Bank for Agriculture and Agricultural Cooperatives’ own reserves.
The long-overdue payments to rice farmers benefit SMEs operating fertiliser and agricultural-equipment businesses, and some banks have seen rising loan demand from such SMEs for buying inventory to support farmers’ next rice crop.
Kasikorn Research Centre (KResearch), meanwhile, has revised upward its economic-growth projection for the year to 2.3 per cent after seeing a rise in consumer confidence.
The previous forecast was for growth of 1.8 per cent.
The centre has also revised upward its SME loan-growth forecast for commercial banks this year to 7.5 per cent. The previous projection was for 6.5-per-cent growth.
Thanyalak Vacharachaisurapol, head of money and banking at KResearch, said the banking sector was witnessing a combination of improved confidence and better prospects due to rising SME lending demand. During the political troubles, SMEs slowed down their activities and some companies in the tourism sector asked for help from the banks, he said.
As to retail – or individual – banking, housing loans are the only segment where lending growth has returned, while increased demand for auto lending might be seen in the fourth quarter, which is the high season for auto sales.
KResearch estimates housing loans this year will grow by 6-8 per cent, while auto lending is expected to increase by 4.5-8 per cent
There has not yet been dramatic growth in retail lending, even though the political situation has stabilised since the coup, as lenders still have concerns over borrowers’ ability to service their debt. Another factor is that demand for auto financing had been accelerated over the past two years, largely due to the first-car scheme.
This has resulted in this year’s picture for auto – and hence retail lending generally – tending to be one of correction, said Thanyalak.
Retail lending also faces a growth challenge through next year from the fact that many individual borrowers cannot create more debt as they already have a full debt-service ratio.
Furthermore, the upward trend of interest rates is a barrier for people with monthly income of less than Bt10,000, she added.
Meanwhile, the recovery in consumer confidence is providing an opportunity for credit-card operators, which are expected to resume special campaigns aimed at benefiting from the rebound in purchasing power.
In the corporate sector, activity has rebounded in building and construction, but a clear picture of corporate activity in terms of new investment is only expected to be seen once there is certainty over state infrastructure projects, which are currently being reviewed by the NCPO.
Kosit Panpiemras, executive chairman of Bangkok Bank, said a positive sign for the banking sector following the coup was that there was now more confidence in the private sector, with political stability ensuring a smooth path for doing business.