Tisco expects improvement in net interest margin next year
Play
Tisco Bank expects its net interest margin (NIM) to further strengthen next year as competition in the deposit market is not likely to be intense because of adequate liquidity in the banking industry.
Tisco’s NIM increased to 3.11 per cent at the end of the third quarter, from 2.95 per cent in the second quarter, said Suthas Ruangmanamongkol, president of the bank.
The bank is writing a business plan for next year. He said the bank will not be in a rush to chase deposits, and this trend is likely to pervade the entire banking system.
Wealthy customers upcountry are one of the deposit bases for Tisco but the bank has no plan to expand the number of branches upcountry, as the affluent customers in the provinces maintain deposit accounts with Tisco branches in Bangkok.
“We can manage their wealth from our branches in Bangkok because those customers often come to Bangkok and some send their children to study at schools in Bangkok. Therefore, we don’t have a problem in servicing them even we though may not have many branches in the provinces,” he said.
The bank has projected gross domestic product for next year at 4.5 per cent. Among the key drivers of loan demand next year will be the government’s planned infrastructure projects, and corporate loans. The government is expected to raise fund through bonds rather than borrow from banks, which saves banks the need to mobilise much funds, said Suthas.
As the competition in the deposit market is unlikely to be intense, Tisco’s NIM in 2015 should be healthy even though loan growth will not expand much due to the high household debt, he said.
He said auto loans in 2015 would return to growth based on the assumption of car sales growth of 5 per cent projected by automakers. Hire purchase of Tisco next year should grow in line with the auto sales, he said.
The bank saw loan demand drop 6.5 per cent due mainly to a plunge in hire purchase, which accounts for 65 per cent of the bank’s total loan portfolio.
The weak price of crops is another factor that will impact auto loans next year. However, he hopes that the government’s measure to help farmers will help improve cash flow to this customer segment.
The low prices of crops are not as much a cause for worry for the bank as the political issue, he said.
Political stability will provide opportunity for business growth and improve the quality of debt. He said Tisco is focusing on lower non-performing loans after NPLs at the end of the third quarter rose to 2.35 per cent from 1.7 per cent at the end of last year.
He said the bank might take time in reducing the NPL to the 2013 level.
