Commercial banks are lowering their lending growth targets this year as the economy falters from waning domestic consumption and private investment and the prolonged political tension.
Vorapak: Mulling loan growth target cut
The Constitution Court’s ruling on Wednesday that the 2-trillion-baht borrowing bill to fund the planned infrastructure megaprojects was unconstitutional will dent loan demand even further.
Their moves come after the Bank of Thailand’s Monetary Policy Committee also on Wednesday trimmed its policy rate for the first time this year by a quarter-percentage point to 2% to provide a buffer amid the greater downside risk to the economy.
Shortly after the central bank’s rate reduction, at least three large commercial lenders — Bangkok Bank, Siam Commercial Bank and Kasikornbank (KBank) — followed suit, although not a full pass-on for rate cuts.
Krungthai Bank (KTB), the country’s second-largest bank by assets, is mulling cutting its loan growth target this year to 4.5% from 7-10% after it lowered the country’s gross domestic product (GDP) growth forecast to 3.3% from 4-5%, said president Vorapak Thanyawong.
“If political instability does not end within the first half of this year, the business sector will feel a significant effect,” he said.
However, infrastructure project investment remains the main policy regardless of which party will lead the next government.
The Constitution Court ruled that the government-sponsored bill to borrow 2 trillion baht to fund infrastructure development violated the charter both in its content and in its enactment procedure.
Separately, Mr Vorapak said KTB would cut its lending and deposit rates next week in accordance with policy rate cut.
Weidt Nuchjalern, a first senior executive vice-president of KTB, said the lending rate cut will relive borrowers’ financial burden and improve debt servicing ability, while banks can keep its loan quality.
However, the magnitude may not be very significant since it is a small rate cut.
“Special mention” loans, defined as 30-90 days overdue, and non-performing small commercial loans with a maximum credit line of 20 million baht have risen from 2.3% in December to 2.6% now amid the stuttering economy, he said.
KTB must closely monitor the situation of special-mention loans by increasing the frequency of loan status checks to a monthly from a quarterly basis as part of efforts to maintain its bad loans at a low level amid the bleak economic prospects.
TMB Bank has adjusted its loan growth target this year to 8% from the previous goal of 10% after cutting the GDP growth rate to 2.9% from 3-4%, said chief executive Boontuck Wungcharoen.
Political instability and suspension of the 2 trillion baht worth of infrastructure megaprojects will be the main factors deepening the toll on the already-lacklustre domestic investment and consumption.
But exports, which are projected to expand 5% this year, will help to underpin the country’s economic expansion.
In addition, Mr Boontuck said TMB Bank is also considering slashing its deposit and lending rates in line with the policy rate cut.
KBank, the country’s fourth-largest bank by assets, recently said it might revise down its 2014 loan growth target to 7-8% from 9-11%.
Meanwhile, central bank spokeswoman Roong Mallikasmas said that since consumer confidence has diminished, boosting domestic consumption through policy interest rate reduction is achievable to a certain degree.
The rate cut is rather aimed at sustaining economic growth amid the current slowdown, she said.
The recent rate cut decision reflects a stable domestic financial market and the country’s affirmed credit rating, exhibiting short-term confidence, Mrs Roong added.