Even though the Bt2-trillion infrastructure budget bill has been shot down as unconstitutional, Krungthai Bank (KTB) believes corporate customers will still be the key driver of its growth this year as large Thai companies continue overseas expansion.
The political deadlock and lower domestic consumption are likely to convince such companies that they have to accelerate their business expansion outside the country, and this will support the demand for corporate loans, Werapong Suppasedsak, executive vice president of KTB, said.
Before the lending bill was killed by the Constitutional Court, KTB had hoped to cash in on government mega-projects as a financial adviser and lender.
Werapong said the bank had shifted focus from the public sector, as the private sector, especially conglomerates, was still expanding. It foresees around 10 conglomerates and large energy companies going international.
Last week, KTB was among five banks that facilitated a syndicated loan of Bt8.6 billion to a subsidiary company of PTT.
KTB believes overseas expansion by these companies will not overheat as in previous years, as they are wary of the uncertainties hanging over the global economy.
Although it believes corporate banking will be a key driver of its loan growth this year, KTB has to be selective in facilitating corporate customers, including mid-sized companies, to keep risks manageable, he said.
The construction and building-materials sector still has potential despite the delay to the government’s infrastructure programme, as major construction companies each have backlogs of Bt100 billion to Bt200 billion, enough to support the sector’s growth for three or four years.
In addition, some government construction projects are still ongoing, such as expansion of Bangkok’s mass-transit system, Werapong added.
‘Corporate loans should be key’
KTB has not changed its corporate-loan-growth target of 6-7 per cent, but may review its business plan after studying first-quarter economic indicators.
Kasikornbank has the same view that corporate loans should be a key driver for the banking sector, rather than small and medium-sized enterprises and the retail sector, which have been hit hard by the political deadlock, executive vice president Vasin Vanichvoranun said.
However, the demand among corporates is for working capital and trade finance more than long-term loans because several companies have delayed their business plans as they await a resolution of the political conflict, he said.
KBank projects corporate-loan growth of 4-7 per cent this year, but will not be surprised if it is at the low end of that range. Conglomerates and large companies are still investing outside the Kingdom, but their activities will be more subdued than last year.
Vasin said the political uncertainty had influenced corporate fund-raising plans, and even PTT has suspended a planned bond issue and used its liquidity instead.
For some corporates that have to recapitalise, issuance of long-term bonds will be the suitable instrument because the United States has signalled its intention to raise interest rates.
Corporates have to lock in financial costs before interest rates start going up in the fourth quarter.