Banks are holding back on campaigns to lure deposits in response to the declining demand for loans amid a slowing economy and prolonged political uncertainty.
The situation of fund mobilisation has changed from past years because of the slower loan demand in all segments, while the political stalemate has discouraged new investment.
Outstanding deposits in the banking industry last year grew by 9.3 per cent to Bt10.93 trillion, led by Krungthai Bank, followed by Siam Commercial Bank, Kasikornbank and Bangkok Bank.
Kasikorn Research Centre expects the industry’s deposit growth this year to be less than 9 per cent. Some major banks have lowered the attractive interest rates that had been established earlier to attract deposits.
SCB executive vice president Smith Banomyong said the bank targeted deposits of Bt100 billion this year, significantly down from last year’s Bt230 billion. To manage its funding costs, the bank has decided to tone down its focus on clients with the potential to make large deposits.
One of its attractive packages for general customers now is a four-month fixed deposit with rates of 2.3-2.55 per cent, which it launched on January 1.
Smith said several banks had offered attractive rates for the short term while waiting to see what the Bank of Thailand does with the benchmark interest rate at the next meeting of the Monetary Policy Committee (MPC) on March 12.
In the past few years, SCB accelerated deposit growth to serve the high loan growth it was seeing. In 2012, it mobilised deposits of Bt250 billion, and Bt230 billion last year.
SCB this year projects loan growth of 7-10 per cent, significantly down from 11.5 per cent in 2013, 19.7 per cent in 2012 and 22.1 per cent in 2011.
Kris Chantanotoke, executive vice president of Bank of Ayudhya, said the intense competition in the deposit market in the past two years had led to pricing tactics by major banks to attract customers. Small and medium-sized banks had to adjust their returns to compete.
BAY also easing interest rates
BAY this year is also toning down the high interest rates on its deposit products. He said a rate of 3 per cent for short-term deposits was not likely to be seen.
BAY offers two campaigns: a five-month fixed term offering 2.6 per cent and a 10-month fixed deposit offering 2.8-2.9 per cent.
He said the era of attractive interest rates for deposits might stay dormant for the medium term if the MPC trims the policy rate next month.
CIMB Thai has often introduced deposit campaigns offering more than 3 per cent per annum, but its latest promotion offers just 2.88 per cent for an eight-month fixed deposit.
Adisorn Sermchaiwong, senior executive vice president of CIMB Thai Bank, said it would not be easy to offer 3 per cent for a short-term campaign while loan demand is sluggish.
Chutamas Sombunyaviroj, first executive vice president for commercial-banking marketing at Land and Houses Bank, agreed that more than 3 per cent for a special deposit product would be hard to offer at this time. LH Bank earlier promoted high rates for its deposit products to compete with small and medium-sized banks.
Krungthai Bank, in contrast, is offering high rates in its latest Valentine’s Day deposit campaign, but it features a long tenor. The 60-month fixed deposit pays 4 per cent per annum.
Weidt Nuchjalearn, first senior executive vice president of KTB, said lower deposit mobilisation depended on banks’ strategies and lending growth.
KTB launches deposit campaigns to roll over from earlier products that have matured.
He added that banks with a high proportion of current and savings accounts (CASA) had no need to promote high-return deposit campaigns.
KTB aims to boost its CASA ratio to 70 per cent this year from 58 per cent in 2013 to expand the cross-selling of products.
Standard & Poor’s said in a report titled "Thailand Banking Outlook 2014" that it expected bank credit growth to slow to 8-10 per cent this year while Thai banks’ capitalisation and funding and liquidity profiles would remain stable.
Highly stable core customers’ deposits will continue to account for a large portion of the banking system’s total funding, keeping banks’ dependence on external funding low, the report said.