MR Chatu Mongol Sonakul, chairman of the Bank of Thailand's board of governors, will soon arrange a discussion with foreign banks' representatives on the slow progress of their business expansion in Thailand.
After a meeting with Chartsiri Sophonpanich, chairman of the Thai Bankers Association yesterday, he told reporters that he wanted to exchange views on the issues that slow their lending despite a sizeable number of operators.
"If foreign banks expand fast, Thai banks will need to step up their fight. Liberalisation would not hurt much…There is a question why foreign banks, which have lost tens of billion here, have rarely expanded business," he said.
According to the Bank of Thailand, at the end of the first quarter, the outstanding loans of 15 foreign bank branches totalled Bt899 billion, or Bt67 billion above the end-2009 level. Thai banks' combined loans stood at Bt7.08 trillion, up over Bt200 billion over the corresponding period. Chatu Mongol yesterday said that higher loan extension would be a way to narrow the interest rate spread, as banks enjoy higher interest income. However, that should take time thanks to excess liquidity.
Commercial banks now deposit Bt2.3 trillion at the central bank for a 0.7 per cent interest. As the economy has not yet fully recovered, lending activity is not at full stream and this reflects in their share prices which remain below record highs of Bt300, he said.
"If the economy is in good shape and loan demand grows, banks' profitability will grow. That we order the specific spread depends. Who will knows to whom banks need to make donations, if any deposits are missing... There are a number of factors. Market mechanism must be allowed to play," he said.
Bangkok Bank's Charnsak Fueangfu said banks are now mainly involved in extending working capital while project financing should resume when capacity utilisation rises from 70 per cent now to 80 per cent. BBL has set a 5-per-cent target for loan growth this year.
Kasikornbank president and CEO Banthoon Lamsam said he is ready to discuss on the recommended increase in savings rate. However, he said that could be done only when there is fair talk on interest and other expenses.