TMB Analytics ups forecast for banking industry's loan growth

The Bt136-billion injection into Village Funds and the Bt100 billion in soft loans to small and medium-sized enterprises will boost lending by 0.6 per cent over the next six months, said Benjarong Suwankiri, head of TMB Analytics. Half of that increase will be apparent in the current fourth quarter and the rest in the next quarter.

He said government investment was improving the confidence of the private sector, which the house believes will start ramping up activities next year, and these will be a tailwind for the economy in 2016.

TMB Analytics projects that gross domestic product will grow by 3.5 per cent in 2016, up from the expected 2.5 per cent this year. Based on the fundamentals of the Thai economy, GDP should have the potential to grow by 3.7-4 per cent amid fragile external factors such as demand for exports. 

Therefore, lending by commercial banks next year should expand by 6.1 per cent, driven by business loans. TMB Analytics predicts that business lending in 2016 will jump by 5.3 per cent compared with the 4.4-per-cent growth expected this year.

Consumer lending in 2016 will not grow much because high household debt will continue to limit loan demand. TMB Analytics said consumer loans in 2016 were expected to grow by 8.1 per cent, compared with this year’s expectation of 7.4 per cent.

In the previous two years, consumer loans witnessed double-digit growth, and were the key driver of lending by commercial banks. However, in the view of TMB Analytics, double-digit growth in this segment is unlikely for now.

The Bt100-billion soft-loan programme and new criteria for the Thai Credit Guarantee Corporation are positive for commercial lending, Benjarong said.

TMB Analytics also expects the rate of non-performing loans by the end of 2016 to decline to 2.6 per cent from 2.85 per cent at present.

He said commercial banks would start to mobilise deposits to deal with the expected resurgence in loan demand. Meanwhile, the reduction of deposit protection from Bt25 million per bank per account to Bt1 million next August will increase the competition in deposit products.

The research expects deposits in 2016 could expand by 6.8 per cent.

He said there was an oversupply in the property market, meaning the measures the Cabinet approved on Tuesday would be unable to benefit the economy as much as hoped.

In the past, government measures to spur consumption through lending had three times the positive effect on GDP growth than non-lending measures. However, after the end of the measures, the country witnessed a slowdown in consumption and a one-year delay in economic recovery. Therefore, the government has to prepare medium-to-long-term measures if consumption declines again after the short-term economic packages end, Benjarong said.