BAY targets SMEs in bid to boost lending by 11% this year
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Bank of Ayudhya (BAY) will this year focus on loans to small and medium-sized enterprises, fee-based income and boosting its current account-savings account (CASA) ratio in pursuit of its loan-growth target of 11 per cent.
BAY is optimistic the banking industry will continue to grow.
Expected growth in gross domestic product of 4-5 per cent, post-flood rehabilitation efforts, the policy to increase the monthly salary for government workers and the reduction in the corporate income tax are positive factors for the industry this year.
Negative factors include the expected higher Deposit Protection Agency (DPA) fee, the rising oil price, the floating of the natural-gas price and the poor global economic outlook.
Despite these risks, president and chief executive officer Mark Arnold expressed confidence at a news conference to announce BAY’s 2011 results and 2012 business direction that the industry would grow.BAY’s net profit in 2011 was Bt9.3 billion, up 5.5 per cent year on year. Loans grew by 13 per cent.
Arnold said the bank projected loan growth this year of 11 per cent, of which a key driver would be SMEs, which are expected to gain from flood-rehabilitation investments by larger private players and the government.
“We estimate loans to SMEs should grow at 2-2.5 percentage points above GDP [growth]. To increase loans, BAY will offer more innovative products and services,” he said. Fee income is set to grow by 12 per cent. It slowed to 7.3 per cent in 2011 after the bank waived fees for flood-hit customers.
Net interest margin in 2012 is forecast to decline slightly to 4.4 per cent from 4.5 per cent on the impact of higher DPA fees that banks will be subject to as part of a plan to pay the debt of the Financial Institutions Development Fund.
“The deposit costs will surely be increased and this will have an impact on net interest margin. Therefore, the ratio should fall slightly, and that’s why we have to focus on increasing fee income to offset the higher costs of funds,” Arnold said.
To ease these costs, BAY plans to increase its CASA ratio to 45 per cent from 43 per cent in 2011.
Kris Chantanotoke, executive vice president, said the bank would gradually cut the proportion of bills of exchange (B/Es) from 20 per cent of overall deposits.
“We might offer B/Es if the gap between B/Es and fixed deposits is wide enough to attract investors,” he said.
