Banking.
From The Report: Thailand 2014
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Accounting for 30.1% of bank lending in the second quarter of 2013, consumer lending has been the key driver of loan growth. Household debt rose from 56% of GDP in 2007 to 77% in 2012. Dominated by Thai lenders, the banking sector remains well-capitalised and liquid. Strong fee-revenue growth is offsetting pressure on net interest margins. Due to increased competition for deposits, net interest margins declined from 3.07% in 2012 to 2.53% in the second quarter of 2013, according to Bank of Thailand data. Although the banking sector is open to majority acquisitions by foreign investors on the finance minister’s approval, Thai-owned lenders dominated the market until 2013. The key to system stability will be for authorities to ensure fair competition between commercial lenders and state-owned institutions. As Thai corporates continue to expand regionally and further afield, Thai banks will face growing competition from their regional peers in ASEAN. Domestically, government spending plans will prove key determinants of the banking sector’s short- to medium-term growth trajectory.

This chapter contains interviews with Prasarn Trairatvorakul, Governor, Bank of Thailand; Chartsiri Sophonpanich, President, Bangkok Bank; Frank Krings, Chairman, Association of International Banks, and Chief Country Officer, Deutsche Bank Thailand; Kannikar Chalitaporn, President, Siam Commercial Bank; and Noriaki Goto, CEO and Director, Krungsri (Bank of Ayudhya).

Articles from this Chapter

Overview

A positive outlook: With increasing competition, lenders are diversifying their profit drivers
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After two years of rapid growth in lending to the private sector, Thai banks started 2013 faced with slowing growth and by building their counter-cyclical buffers. While the compound annual growth rate (CAGR) in loans and deposits averaged 3.25% and 5.84%, respectively, in the 15 years to 2012, according to Deloitte, loan growth jumped to 13.7% in 2012 buoyed by post-flood reconstruction and government policies to boost domestic consumption. Total assets of BT16.03trn ($524.2bn) and a pool of 83.5m…

Interview

Guiding hand: OBG talks to Prasarn Trairatvorakul, Governor, Bank of Thailand (BOT)
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Interview:Prasarn Trairatvorakul How has the BOT eased restrictions on foreign banks? Do you anticipate greater domestic equity stakes being acquired by international firms? PRASARN TRAIRATVORAKUL: Thailand has been promoting financial liberalisation since 1994, when it fully liberalised its current account transactions and allowed greater freedom for foreign investment. Only certain restrictions on capital outflows and foreign ownership, such as in the real estate and banking sectors, remain.…

Interview

OBG talks to Chartsiri Sophonpanich, President, Bangkok Bank
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Interview:Chartsiri Sophonpanich Do you feel that Asia is at risk of a new credit bubble, and how can lending be reigned in? CHARTSIRI SOPHONPANICH: The credit bubble of the late 1990s was one of the factors behind the 1997-98 Asian financial crisis, and Thai banks and financial authorities wish to avoid such a reoccurrence. Our banks are thus prudent and focused on quality lending. We are applying rigorous Basel III standards and risk-management policies. If the property market gets too…

Analysis

Relaxing the rules: Foreign direct investment in the sector is set to increase
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As the Bank of Thailand (BOT) gradually reduces constraints on foreign direct investment (FDI) in the banking sector, Asian banks are proving the keenest to tap opportunities. A key plank of the regulator’s second Financial Sector Master Plan (FSMP) is to reduce costs and enhance the competitiveness of Thai banks by allowing more foreign entrants. While it plans to award five new foreign commercial bank subsidiary licences in 2014, more aggressive investors are seeking majority equity stakes in…

Interview

OBG talks to Frank Krings, Chairman, Association of International Banks (AIB), and Chief Country Officer, Deutsche Bank Thailand
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Interview:Frank Krings Foreign banks with Thai branches account for 15% of commercial banks’ assets. What limits these banks from achieving a greater market share? FRANK KRINGS: When looking at the retail and small and medium-size enterprise (SME) side, I would not anticipate foreign banks to make significant organic inroads, since capacity-wise the market is well banked already and most of private sector institutions make decent returns. This is an enviable position when compared to certain…

Interview

OBG talks to Kannikar Chalitaporn, President, Siam Commercial Bank
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Interview:Kannikar Chalitaporn What are the current risks to Thailand’s financial stability, and are banks expanding their counter-cyclical provisions to hedge against uncertainties? KANNIKAR CHALITAPORN: The possibility of the US Federal Reserve continuing to scale down its asset purchase programme and the associated risk-off sentiment have already caused foreign capital to flow out of emerging market countries, including Thailand. But even with sizeable capital outflows, Thailand’s…

Analysis

Staying solid in a lean market: Banks are making provisions to deal with bad debt
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Lenders in Thailand are expected to adopt a cautious position throughout 2014, keeping a close watch on household debt levels and monitoring the local economy’s return to growth following a contraction earlier in 2013. In late October 2013, Moody’s Investors Service issued a report on the outlook of the Thai banking system, saying that the sector remained stable, with loan-to-deposit ratios forecast to stay well below 100%, and capitalisation above regulatory minimums. According to Simon Chen,…

Interview

OBG talks to Noriaki Goto, CEO and Director, Krungsri (Bank of Ayudhya)
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Interview:Noriaki Goto What factors make Thailand’s banking sector a desirable destination for foreign investment? NORIAKI GOTO: Encouraging increased rates of foreign participation is a growing objective for Thailand, as the country aims to make the domestic banking industry more competitive. While already a bank-based economy, Thailand still has relatively low banking product penetration as compared to other large economies. The country is taking steps to tighten risk management and compliance,…