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).