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TMB Bank sees lower net interest margin, but deposit still growing

TMB Bank may witness net interest margin (NIM) this year of less than 3 per cent, but even though loan growth is slower, deposit growth remains strong.

Last year, NIM climbed to 3.12 per cent from 2.73 per cent in 2012. But this year, NIM so far has been below 3 per cent after lending slowed because of political uncertainty.

Boontuck Wungcharoen, chief executive officer of TMB, said the weaker NIM was due to slower loan growth, reflected by the loan-to-deposit ratio of 90-91 per cent, down from 95 per cent at the end of last year.

Deposits are still growing, mainly from retail customers, thanks to the many deposit products TMB has been offering with high interest rates and special features such as fee waivers.

He said loan demand was slowing in line with gross domestic product, for which several research houses as well as the Bank of Thailand have cut their growth forecasts for this year. TMB has cut its GDP growth forecast to 2.9 per cent from 3.5 per cent and will present a new loan-growth target for the board of directors' consideration next month, he added.

He said the loan-growth revision was not as worrying as the signs of delayed debt payments by small and medium-sized enterprises. SME clients have witnessed tightening liquidity because their customers have delayed payments as well, which will have an impact on debt payments to the bank.

TMB saw non-performing loans rise since November before recovering last month. However, it is too early to evaluate whether the situation is improving, so the bank will continue monitoring it.

Paphon Mangkhalathanakun, chief SME and supply-chain officer of TMB, said the rate of delayed payments by SMEs appeared to be increasing, so the bank had to send teams to talk with customers on this matter.

"We make an early warning by checking the transactions of customers. If some have made unusual overdrafts … our relationship managers will talk with them and offer solutions," he said.

Paphon said that amid the current challenging situation it was not easy to acquire new customers, so the bank would target new SMEs that require transactions, and will monitor their transactions for up to six months before offering loans.

He added that the bank might focus on medium-sized enterprises - those with annual revenue of Bt50 million to Bt500 million - to control risk. Medium-sized enterprises account for Bt75 billion of the total loan portfolio of Bt170 billion for SMEs and supply chains, so the bank has room to grow in this category.

Boontuck said construction was one of the businesses that called for more caution because the real-estate industry has slowed significantly. However, TMB has few customers in this category, while major construction firms and property developers have sufficient liquidity to deal with the sector's slowdown.

He said the challenge for businesses during this period of political and economic uncertainty was how to improve efficiency and manage liquidity.

However, in the long term, Thailand still has potential, and the approach of the Asean Economic Community is encouraging local businesses to prepare to take advantage of new opportunities in the regional market.

Border trade is a bright prospect for both SMEs and larger corporates. Moreover, more people in neighbouring countries are coming to Thailand for medical treatment, a good sign that the AEC will boost income of people in the region including this country.

TMB will have to improve its branches in border provinces as well as support customers that have exposure to the AEC. It will also cooperate with banks in neighbouring countries to help Thai companies succeed there.


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