Siam Commercial Bank's wholesale banking operation will not play a proactive role in funding sectors such as real estate and tourism this year, as they are expected to be adversely affected by lower consumption and the prolonged political unrest.
Arthid Nanthawithaya, a senior executive vice president and head of SCB’s wholesale banking group, said that while the bank would continue to actively support funding to customers in the financial and capital markets, lending to sectors such as property and tourism should be carefully monitored.
Reduced domestic consumption has negatively affected demand for real estate, which will mean developers slowing down their projects to cope with the economic uncertainty, he said.
Tourism is another sector under pressure, as it is being affected by the unrest. Even though the sector invests for the long term, it has been rapidly impacted by the political turbulence, he added.
Other sectors that require increased vigilance on the part of SCB are those related to public investment, as well as supply-chain businesses because if production declines, their business will be affected as well, said the executive.
The gloomy sentiment surrounding the property sector will pull down the volume of real estate investment trusts, he added, unless the retail sector, which is expected to launch further funds, makes up for such a fall.
“We have deals in the pipeline, including for example the infrastructure fund of the Electricity Generating Authority of Thailand, even though this fund has to be approved by the new Cabinet [following the February 2 election],” Arthid said.
Meanwhile, SCB views the export sector as clearly being in recovery mode due to the improved economic health of the US, Japan and China, while the current trend of the baht’s depreciation will support exporters.
In line with the bank’s conservative loan-growth target, the wholesale banking division will place more emphasis on fee income this year.
The division provides funds to large corporates by lending and helps them raise funds through the capital market and investment banking.
Arthid sees wholesale banking in the next 12 months as very challenging, because the division will have to maintain revenue growth amidst slow economic expansion.
Last year, SCB’s wholesale banking group reported fee-income growth of more than 20 per cent and overall revenue expansion of 10 per cent.
Lending was not the main income generator of the division because SCB has been shifting its focus more to fee income for many years, he said.
Fee income from foreign exchange generates the highest income, at 30 per cent of the total income of the wholesale banking operation. And forex would continue to generate the highest income this year, as the export sector would be in recovery mode, he added.