Thailand's loan extension in January contracted 0.6 per cent month on month but rose 0.8 per cent compared to the same period last year, due to higher working capital loan repayments by corporates and small and medium-sized enterprises (SMEs).
Despite seasonally weaker loan demand from corporates and SMEs in the first quarter, the quarter's loan contraction should be milder than before because of Thailand's economic recovery.
Most banks registered loan contractions, led by Siam Commercial Bank following higher repayments by SMEs. Only Krung Thai Bank that posted loan growth of 1 per cent among large banks, due to higher government related loans.
DBS Vickers Securities (Thailand) expected the loan growth in 2010 will increase 6.6 per cent on year. The target is revised up from the earlier forecast of 5.8 per cent.
It said the loan growth would be supported by the second stimulus package and stronger new origination loans as the economy recovers.
"We also forecast stronger sector earnings growth of 20 per cent in 2010 after imputing higher loan growth of 6.6 per cent, 27 basis points wider net interest margin, 15 per cent higher year on year fee income, and lower credit cost of 80 basis points of total loans," the brokerage house said.
