Kasikorn Research Center summarizes data on loans, deposits, and liquidity from 14 Thai commercial banks as of the end of May 2017 based on the asset and liability summary document (Form B.E. 1.1), with key points as follows:

Net loans in May 2017 continue to recover, driven by large business loans, while retail loans remain stagnant.

     Overall net loans in May 2017 increased by 0.43% MoM and 1.67% YoY, marking a continuous expansion from the previous month, led by large business loans, particularly short-term business loans, which were the main factors driving the unexpected growth of loans from large commercial banks this month. Meanwhile, SME loans and retail loans did not change significantly from the previous month as banks remain cautious in extending loans to SMEs and unsecured retail loans (credit cards and personal loans) due to the high levels of bad debt risk in these segments.

Additionally, the slowdown in household purchasing power continues to pressure the growth of retail loans. Notably, the growth rate of credit card spending has slowed in the first 4-5 months of this year (the first four months of 2017 grew by 4.3%, down from 8.7% during the same period in 2016), which may reflect the ongoing lack of clear recovery signals in retail loans.

Deposits in May 2017 saw the first decline in a year to manage costs.

     Overall deposits in May 2017 decreased for the first time since the beginning of the year by -0.05% MoM, but the outstanding deposit balance remains 3.52% higher than the same period last year (and 2.34% higher than the end of 2016 YTD). Many banks have slowed down their deposit mobilization, not only due to the still high liquidity but also to focus on managing income from interest rate spreads after announcing a reduction in the reference interest rate for loans to retail customers in mid-May.

 

Liquidity in May 2017 tightened slightly due to pressure from declining interest income.

     Overall liquidity in banks tightened from the previous month due to the higher growth rate of loans compared to deposits, resulting in the loan-to-deposit and debt securities ratio (LTD+Borrowing Ratio) rising to 90.40% in May 2017 from 90.11% in April (the lowest in 12 months), consistent with the liquidity asset ratio to total assets decreasing to 21.70% from 21.84% in the previous month.

Net loans are expected to close the second quarter of 2017 near 2% YoY, while competition for deposits is likely to decrease.

     The reduction in the reference interest rate for retail customers effective in May emphasizes the necessity for commercial banks to manage liquidity effectively. Given that the liquidity level has relaxed significantly in the previous period, it is expected to be sufficient to support the gradual recovery of loans in the second quarter, suggesting that the trend of deposit competition in the banking system in June 2017 is unlikely to be intense.

Regarding the loan outlook for the second quarter of 2017, Kasikorn Research Center expects that net loans (loans minus provisions for doubtful debts) will likely close the second quarter of 2017 at around 2.0% YoY, higher than the 1.26% YoY level at the end of 2016, estimating that net loans in June 2017 may increase for the third consecutive month compared to the previous month, but still relying more on business loans than retail loans.

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