BANGKOK: Weak loan growth led to lower funding costs at Thai banks, helping them post a rise in quarterly profits for the first time in more than a year. The combined net profit of the country’s four major banks — Bangkok Bank, Krung Thai Bank, Siam Commercial Bank and Kasikornbank — came to 39.07 billion baht ($1.13 billion) for the July-September period, up 18.9% on the year.
The largest contributor to the increase was state-owned Krung Thai Bank, the second-largest bank by assets, which saw its net profit jump 61% on the year. Interest expenses fell by a substantial 17.2% thanks to a 25.6% drop in deposit costs as “high-cost term deposits” matured, the bank said in a stock exchange filing. “Sluggish loan growths mean that banks don’t need to work hard on gathering deposits for funding,” a Bangkok-based banking analyst said. Krung Thai’s total lending as of the end of September stood at 1.906 trillion baht, down 6% this year, mainly due to loan repayment by the government.
Total lending for all four banks expanded a marginal 0.7%. Loan growth of around 5-6% annually is generally considered “healthy.” But although the fourth quarter tends to be the busiest period for lending in Thailand, as it coincides with the harvest season, analysts do not expect loan growth to reach that level this year. Government infrastructure spending has been increasing, but it is taking some time for those funds to trickle down to the private sector. Consumption remains weak, and exports, the mainstay of the Thai economy, are showing slow recovery.
On top of that, analysts expect the one-year period of mourning for the revered King Bhumibol Adulyadej, who died on Oct. 13, to weigh on businesses, especially those in the entertainment and media industries. Dampened consumer sentiment could also lead to a dip in auto and housing loans. At the same time, the sluggish economy is pushing up bad debts, a trend that is expected to continue for a while.
