Thai banks' lending growth to recover in the second half of 2017

Some banks announced lower loan rates for some customers in May.

The Bank of Thailand (BoT) is keen to see lending growth pick up pace, according to BMI Research. Large Thai banks announced lower loan rates for some customers on May 15, the same day the central bank said it hoped the pace of lending in 2017 would be significantly higher than it was in the first quarter.

Here's more from BMI Research:

Market leader Bangkok Bank, state-run Krung Thai Bank and Kasikornbank said they would cut their retail lending rates by 50bps to help smaller borrowers, while Bangkok Bank also announced it would trim its minimum overdraft rate by 25bps. Siam Commercial Bank, meanwhile, announced that it would cut all loan rates by 25bps, effective on May 16.

We expect the BoT to maintain its benchmark interest rate at 1.50% for the remainder of this year, but continue to look to stimulate credit growth via targeted measures such as moral suasion.

This poses a threat to the otherwise strong profitability of Thai banks, which are benefitting from high levels of profitability thanks in part to high net interest margins as well as manageable levels of non-performing loans.

However, strong levels of capitalisation suggest that Thai banks have the capacity to ramp up lending in response to the regulators' demands.

Furthermore, with external risks facing the economy fading, short-term political risks declining, and low oil prices continuing to provide support to profit margins, we expect lending growth begin to recover in H217. We see total assets growing by just 1.0% in 2017, before rebounding to 5.0% in 2018.