Lenders mixing caution with higher margins: BOT Survey
Financial institutions, for the first time since 2009, are paying more attention to threats to the global economy and raising the margins for both normal and high-risk business loans, according to a recent survey by the Bank of Thailand.
The central bank conducted a survey in September on credit in the third quarter and its outlook for the final quarter of this year.
Based on the survey, since the third quarter financial and non-bank institutions have set more stringent lending conditions for businesses, particularly small and medium-sized enterprises.
"Financial institutions began placing less importance on competition but more on the overall economy and the risks to each industry that may be affected by the global economic situation. Therefore, they have increased the margin for both normal and risky customers," the survey said.
The margin increase for normal customers is the first in three years since the 2009 global financial crisis.
However, amid high competition, financial institutions continue to relax their non-interest charges for large businesses.
In the current fourth quarter, SMEs face stricter lending conditions, including increases in margin for both normal and risky customers and non-interest charges, reduction of credit lines, and stricter collateral conditions.
For this quarter, according to a forecast by financial institutions, the demand for loans from businesses is anticipated to increase, especially for businesses linked with domestic demand. However, the overall demand may not reach the first-half level, as most of that was for rehabilitation after last year’s floods.
These businesses that are linked to domestic demand include automotive and auto parts, property, retailing and wholesale, and food and beverages.
"In the fourth quarter, financial institutions tend to remain strict on lending conditions. They continue to weigh risks to the [Thai] economy due to impact from the global situation, and risks of non-performing loans," the survey said.
The demand for household credit, according to financial and non-bank institutions, is expected to rise for all types, particularly residential loans and credit loans in the fourth quarter. Expected expansion of the property market and spending during the New Year festival are cited for the likely rise in demand.
Fourth-quarter lending principles for household credit are expected to stay close to those in the previous quarter. There is a slight increase in concern about property non-performing loans and other household loans.
In the third quarter, the demand for loans, including residential, other household and credit cards, continued to rise. Residential loans witnessed a sharp increase in demand from the second quarter due to consistent recovery of the property market after last year’s floods, increased confidence of home-buyers, and more attractive lending conditions.
