Bank of Ayudhya (BAY) aims for double-digit growth in foreign exchange income contributed by commercial and retail customers in 2019.
Wild swings in the foreign currency market, including the baht, are expected, which should encourage higher demand in foreign exchange hedging to protect against risks. The bank expects double-digit growth in fee-based income of foreign exchange business because of the uptick in hedging, said Tak Bunnag, head of the global markets group.
For the first nine months of 2018, the bank's gains on trading and foreign exchange transactions amounted to 3.51 billion baht, up 24.2% year-on-year.
The income growth was derived from foreign exchange hedging by commercial customers who are largely importers and exporters.
Moreover, foreign exchange transactions by foreign tourists who visited Thailand supported the income growth, in line with the country's tourism growth.
Mr Tak said demand for financial risk protection by corporate customers increased by 30% for the first nine months of 2018 from the end of 2017, while small and medium-sized enterprises and retail customers delivered 30% and 54% growth, respectively.
"We expect foreign exchange transactions by foreign travellers to continue to rise in 2019, but it is uncertain whether the growth can maintain the stellar pace of last year, as digital and card payments could increase in the digital age," Mr Tak said.
BAY, the country's fifth-largest lender by assets, also offers online foreign exchange services for individuals.
Despite the rapid growth of foreign exchange hedging for all customer segments, Japanese exporters were the only group that contracted, slowing 4% in demand for the first nine months of 2018.
Japanese shippers always correctly predict foreign exchange movement, Mr Tak said, so their demand for hedging is less pronounced.
The bank predicts the baht to move in a range of 30.75 to 33 against the dollar in 2019. The local currency should average 32 versus the greenback in the first quarter and appreciate to 31.75 in the second quarter, Mr Tak said.
He sees the baht firming at 31.62 to the dollar in the third quarter and strengthening to 31.50 baht in the final quarter.
The baht appreciation is mainly the result of a weakening dollar trend in 2019, based on a US economic slowdown that will compel the US Federal Reserve to pause its rate hikes in the second half, Mr Tak said.
BAY shares closed yesterday on the SET at 37.50 baht, up 25 satang, in trade worth 14.7 million baht.