Slower lending growth may mean fewer bank campaigns to attract deposits

The remaining months of the year may see fewer special campaigns by the banks to mobilise deposits as they expect low loan demand to coincide with the slow growth of the economy.

Smith Banomyong, Siam Commercial Bank first executive vice president for the wealth division, said the competition for funds in the banking industry would gradually tone down because consumers are worried about the economic slowdown. Banks and analysts agree that lending growth will slow. Therefore, the campaigns luring new deposits might also slow down.

He said deposits would likely decline as there were new funding sources to attract investors such as the property funds and infrastructure funds expected to be launched in the fourth quarter.

“What the bank plans is to maintain the level of deposits at Bt20 billion to Bt30 billion per month through existing programmes to cope with the loan growth. Short-term fixed deposits such as that for five months with an interest rate of 2.85 per cent [per annum] and the 10-month one paying 2.95 per cent are the currently attractive programmes,” he said. 

SCB acquired new deposits of Bt140 billion in the first seven months, growth of around 10 per cent compared with the targeted 15-16 per cent. 

He said that even though the competition would likely ease, the cost of funds would not reduce much as the bank still offered high interest rates on savings deposits to corporate customers to secure the customer base. 

Thananchart Bank, which specialises in retail banking especially in the instalment-loan sector, is likely to promote deposit campaigns strongly in the second half to back consumer loans in the fourth quarter. 

However, the picture is changing because the slowing growth in the local economy has made people more cautious on spending and therefore on borrowing, said executive vice president Praphan Anupongongarch.

The competition among commercial banks in deposit promotions will not be critical in the second half, he added. 

“With the expectation of slowing loan growth, the banks don’t have the same need to chase funds through special campaigns as before. Still, TBank has maintained lending growth and deposit growth of 10-12 per cent,” he said.

The loan-to-deposit ratio in the banking industry should be reduced in line with the low competition.

Mutual funds, property funds and infrastructure fund, which are expected to be more prevalent, might pull down the liquidity from deposit products. 

However, those funds account for 25 per cent of the Bt10 trillion in deposits held by the banking industry. 

Thus the liquidity of deposits in the industry is sufficient, Praphan said.

Kasikorn Research Centre noted that the trend of deposit mobilisation would weaken in line with the Thai economy, but banks needed to maintain their liquidity to deal with uncertainties and the volatility in financial markets.

The research house projected that lending growth in the banking industry this year would be 11 per cent, which is a good level even though slower than last year.

Weidt Nuchjalearn, first senior executive vice president of Krungthai Bank, believes the fierce competition for deposits will remain because of the lack of clarity on US intentions with its monetary policy, which is influencing fund outflows and domestic liquidity. Therefore, banks will still have to chase deposit to ensure their liquidity.

At KTB, the bank will emphasise current and savings accounts in the remaining months by targeting 8,000 accounts per branch, up from 5,000 currently, he said.

These accounts will help the bank maintain its funding costs, now at 2.7 per cent.   

KTB this year projects new deposits of Bt170 billion, up from Bt130 billion last year.