TMB Bank hopes to keep NIM at 3% this year despite rate cuts
EVEN though TMB Bank is the |only bank that has cut both its minimum lending and retail rates, it hopes that it can still keep its net interest margin (NIM) at 3 per cent this year, as the lower rates should stoke loan demand especially among small and me
Boontuck Wungcharoen, chief executive officer, said last week that the banking industry had faced more challenges in maintaining a healthy spread amid the downtrend in interest rates.
However, the bank believes its low interest rates will bring growth of business from either SME or retail customers.
The recent cuts bring TMB’s minimum lending rate to 6.775 per cent and minimum retail rate to 7.775 per cent.
“We did not change the underwriting system despite the lower interest rates. Our financial services will lead to lending growth.
“TMB is well placed to grow in personal and SME loans.
“For personal loans, the bank targets double-digit growth, and for SME customers, 6-8 per cent in loan growth,” he said.
TMB’s NIM has steadily improved from 2.95 per cent in 2014 to 2.99 per cent in 2015 thanks to cost-of-funds management, which was helped by transactional deposits such as its “No Fixed” account.
Personal and housing loans are primed to grow by the lower rates.
Even though household debt is tending to pile up, mortgages are in demand from homebuyers.
The bank is launching an SME package to boost loans in this segment after lowering the interest rate. SME loans are a high-yield product, so the bank should be able to enjoy a robust NIM.
To manage NIM another way, the bank has trimmed the interest rate for No Fixed deposits slightly. However, the attractive feature of this kind of deposit will ensure that customers are still happy with the interest rate.
SMEs don’t see interest rates as a key factor, Boontuck said. They want to access credit at a reasonable cost.
Corporate customers can seek funding from the capital market, so the role of banks should be to assist them with short-term loans before helping them raise funds by issuing bonds to restructure debt, he said.
Boontuck expects TMB’s long-term loans to come from the SME and mortgage segments.
With slower economic growth – the utilisation rate in manufacturing is only 60 per cent – business customers, outside the energy and telecommunications industries, don’t require long-term loans, he said.
