CUSTODY & CLEARING | Cesar Tordesillas, Thailand

Thai banks wary of high fund cost

Thailand's banks identified the mobilisation of funds to meet loan demand while keping fund cost as low as possible as one of its challenges.


Kris Chantano-toke, executive vice president of Bank of Ayudhya, said that banks have to find a suitable cost of funds in order to maintain their net interest margin.

Even if banks promote attractive rates to draw deposits, they have to keep an eye on the cost of funds to protect their spreads. Banks with more retail loans are in a better position to offer higher deposit rates than banks with more corporate loans. Banks with corporate loans might not offer campaign rates as much as banks with retail customers.

Loan demand in the second half is stronger than in the first half but the loan-to-deposit ratio of the entire industry for the first half was 92 per cent, meaning the industry is facing tight liquidity.

Smith Banomyong, execu-|tive vice president of Siam Commercial Bank, said banks have to promote attractive products but at reasonable costs.

Deposit products to be launched in the second half must match up with the mass market and affluent customers while banks have to add services with the products to enhance their value proposition.

Praphan Anu-pongongarch, executive vice president of Thanachart Bank, said the trend of interest rates today is hard to predict because the repurchase rate might not be based solely on inflation. Global economic volatility might also play a part.

To ensure a steady supply of funds and keep their cost low, the bank has designed deposit products to match up with customer choices.

Ultra Savings offers the highest rate of 3 per cent for customers wanting a short-term investment and planning to spend money in the near future. For depositors not sure the policy rate will be increased or decreased, the bank will suggest the fixed deposit called "Super Grow Up 15 months".

It allows them to make withdrawals once every five months while enjoying a high interest rate of 3.2 per cent.

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