Liquidity in the local banking system is expected to tighten next year in the wake of a lower maximum of guaranteed deposits, an economic rebound and other investment instruments attracting yield-hungry savers, says TMB Analytics.
Private banks will face stiffer deposit competition from state-owned banks and other savings instruments starting next year.
Under the time frame of the Deposit Protection Agency (DPA), the deposit guarantee ceiling will be halved to 25 million baht per depositor per commercial bank starting from Aug 11, 2015 and lowered further to 1 million from August 2016.
Total deposits in the commercial banking sector amount to 10 trillion baht, with an estimated 5 trillion not guaranteed by the DPA.
Some of the unprotected deposits could likely flee to state-owned banks, whose majority shareholder, the Finance Ministry, is liable to provide a blanket guarantee against bankruptcy, while some deposits shift to other savings and investment instruments with higher returns, said Benjarong Suwankiri, a first vice-president and team head at TMB Analytics.
Property funds and real estate investment trusts (REITs) are expected to benefit from deposit outflows, given their claims of a steady revenue stream.
Property funds have gained in popularity among investors, with their IPOs comprising a large chunk of the primary market in recent years. Fund-raising through IPOs grew by 15% a year from 2008-13 compared with 6% for other types of funds.
REITs, which will legally replace property funds soon, are expected to receive a good response from investors.
Once the deposit protection is lowered to 1 million baht per person per commercial bank, TMB Analytics expects a fully fledged flight to other options, as unprotected deposits will make up 80% of deposits outstanding.
"Next year privately owned banks will face stronger deposit competition from both state-owned banks and other savings instruments, tighening the industry's liquidity as a result," said Mr Benjarong.
A higher interest rate in both the domestic and global markets is another factor likely to soak up liquidity in the banking system.
The research house forecasts the US Federal Reserve will start normalising its benchmark rate in the second half of next year, with the Thai central bank following suit.
TMB Analytics predicts the Bank of Thailand's Monetary Policy Committee will jack up the policy rate to 2.5% next year from 2% now, in line with the country's economic recovery.
The research house estimates Thailand's GDP growth will be 2% this year and 4% next year.