SCB upbeat on junta's economic framework

Economy June 24, 2014 00:00

By Sucheera Pinijparakarn
The Na

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Right measures will help drive economy, boost lending and brighten Thai outlook in three months, says president

The country’s third-largest bank by assets, Siam Commercial Bank, hopes the country’s outlook will get brighter in the next three months as the National Council for Peace and Order (NCPO) carries out its economic framework.
The military’s ruling NCPO is heading in the right direction by paying rice farmers what they are owed and going ahead with infrastructure projects, said the bank’s president, Kannikar Chalitaporn.
She said consumer and business confidence was improving, which was more important than gross domestic product as it was fundamental to sustainable economic growth. SCB attributes the economic improvements to the NCPO, 
and believes the overall picture will brighten in the next three months.
Loan demand has not recovered significantly yet but enterprises are regaining their confidence in doing business, she said, hoping that this would translate into higher loan demand in the third quarter, returning to normal from the fourth quarter onwards.
“Demand for loans will be seen first in line with consumer confidence, led by housing loans, because when homebuyers are more confident in the economy, they are ready to take possession of housing units,” she said.
Demand for auto loans is expected to resume next year. 
In the past three years, auto loans at SCB grew at an annual rate of 50 per cent, but when car purchases slowed and there were large debt repayments, net loan growth in this segment slowed as well, she explained.  
Kannikar believes that lending to small and medium-sized enterprises will be the second sector to recover after retail loans, while lending to corporates will resume by year-end or next year based on public investment initiated by the junta.
SCB and the Federation of Thai Industries are holding the ninth “SCB-FTI Factory Outlet Fair” this week. 
The fair is aimed at promoting sustainable growth for SMEs and boosting domestic consumption. It is expected that the five-day fair, which ends on Friday, will generate revenue of up to Bt18 million.
Kannikar said 2014 was a year of uncertainty, and SCB had reviewed its business plan several times before deciding on a conservative growth strategy and focusing on controlling bad debts. This is the first year that SCB’s loan-growth target is the same as that of the overall banking industry, 5 per cent.  
Its non-performing loans are stable at 2.1 per cent of the total, a rate that the bank plans to maintain throughout this year.
Kannikar said the bank had no plans to issue debentures to strengthen its Tier II capital as it has placed importance on Tier I. 
The bank’s capital-adequacy ratio at present is 15.6 per cent, comprising 12.2 per cent Tier I and 3.4 per cent Tier II.
Krungthai Bank has raised its subordinated-debt portion of Tier II capital from US$500 million to $700 million (Bt22.7 billion) after holding a debenture roadshow last week for foreign investors, who subscribed to $3.8 billion.
Even though the cost of this debenture is higher than the previous one, foreign investors have expressed more confidence in the Thai economy and KTB’s status, as the bank’s major stakeholder is the Finance Ministry, said Kittiya Todhanakasem, first senior executive vice president.