RETAIL BANKING | Roxanne Uy, Thailand

Will Thai banks continue to expand lending in the near term?

Check out how this will affect the competition for deposits.

Reports say that the competition for deposits intensified in Thailand as lending expanded 14.2% in the second quarter against 10.1% year-on-year growth of deposits. How will this affect the country's banking industry?

According to Mark Young, Managing Director, Head Asian Pacific Financial Institutions at Fitch Ratings, Thai banks' funding profile is relatively weaker compared with some other APAC banking systems (barring Korea and Australia of course) with L/D ratios above 90% even for well established banks with good franchise. Since all banks are aggressively looking to mobilise deposits it may lift their cost of funds and in turn pressure their margins and profitability somewhat.

He added: "Loan growth too has been far higher than Thai banks have historically registered over the last 8-10 years which is further putting pressure on their funding. Given limited supply, eventually, they will have to tap more LT funds (such as bonds) - which they are doing more actively than in the past both THB and USD denominated - and also to temper their loan growth in order not to put too much pressure on their funding profile."

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