ttb unveils plan to tackle household debt and falling interest rates

Amid global economic shifts and mounting domestic challenges, Thailand’s banking industry is at a critical turning point. Unlike many other sectors, banks are entering a period of declining interest rates, a cycle that inevitably squeezes their core revenue streams.

When interest rates fall, deposit rates tend to adjust more slowly than lending rates, while surplus liquidity parked with the Bank of Thailand earns lower returns. 

This dynamic puts pressure on banks’ net interest margin (NIM), reducing their ability to generate profit. At the same time, slower economic growth is heightening the risk of loan defaults, further compounding the sector’s vulnerabilities.

Piti Tantakasem, Chief Executive Officer of TMBThanachart Bank (ttb), painted a cautious picture of the industry’s outlook. He stressed that banks are likely to face deeper challenges than other sectors, as shrinking NIMs converge with rising risks of non-performing loans (NPLs).

According to Piti, the only immediate lever banks can reliably control is their operating costs. Institutions will therefore need to pursue aggressive cost reductions and maintain strict expense management to stay resilient. This will be a prolonged challenge for the banking sector, as falling interest rates and a slowing economy converge, he noted.

On artificial intelligence (AI), Piti described it as both an opportunity and a threat. For large enterprises, AI offers the chance to reduce costs and enhance efficiency. For others, particularly workers unable to upgrade their skills, AI poses the risk of widespread job losses – a concern not limited to Thailand but shared globally.

The Thai banking sector, however, is no stranger to disruption. Over the past seven to eight years, ttb has gradually transformed, cutting its branches from nearly 1,000 to around 400, and reducing staff from almost 20,000 to 14,000, largely through early retirements and restructuring.

Piti emphasised that ttb follows a “self-fund” approach to technology investment: only cost savings generated internally can be reinvested in new systems. This ensures that technology spending either creates new revenue streams or significantly reduces costs. 

The bank also runs an Early Retirement (ER) scheme, allowing staff to opt for retirement from the age of 50, compared with the standard retirement age of 55.

In the current climate of economic uncertainty, falling interest rates and limited credit growth, banks face the dual challenge of safeguarding performance to maintain investor confidence while exercising greater caution in lending as credit risks rise. Revenue generation, therefore, remains a significant test for the sector.

When banks hold surplus capital but cannot expand their asset base through lending, they have turned to adjusting their dividend payout ratios. While raising payouts can reassure investors in the short term, it risks creating expectations that may not be sustainable.

Share buybacks have also emerged as a strategic tool to return capital to shareholders. By splitting returns between dividends and buybacks, banks can stabilise their share prices and signal confidence to investors.

Recently, ttb announced a share repurchase programme worth 21 billion baht, beginning with 7 billion baht in the first year. Of this, around 5 billion baht has been executed over six months. 

However, with the stock market performing well, the bank chose not to deploy the full amount, instead opting to reserve funds for periods of weaker market conditions, when intervention could help support its share price.

Meanwhile, employee share purchase schemes are attracting increasing interest. With deposit accounts offering little more than 1% interest, ttb shares stand out, delivering dividends of around 6%.

Piti also raised concerns about the ease of credit access in Thailand. With a wide range of lenders now active — from banks to non-bank institutions — he questioned whether borrowing has become too easy for Thais.

He cited the growing prevalence of “buy now, pay later” schemes, which are now available for everyday purchases such as coffee or a meal at a hot pot restaurant. 

This, he argued, runs counter to the already high debt burden in Thailand, where some individuals carry loans from more than a dozen different financial institutions. Such patterns highlight the severity of over-indebtedness and the risks of borrowing from multiple sources.

“If the process of lending and borrowing continues unchecked like this, the country will collapse,” Piti warned, stressing that solutions must begin with financial discipline at the individual level. 

Structural reform is needed to promote both responsible lending and responsible borrowing, he said.

Piti described the solution as a “three-legged stool” required to create stability and strength in tackling household debt sustainably:

• Comprehensive credit data – All lenders, whether banks or non-banks, should be required to report loan data to the National Credit Bureau (NCB). At present, many lenders access NCB data but do not contribute to the system themselves. A complete centralised database would provide the foundation for responsible oversight.
   
• Transparent credit scoring – Once the database is comprehensive, individuals should have access to a transparent credit score. Those who demonstrate responsible borrowing would be rewarded with lower interest rates, providing tangible incentives for better financial behaviour.
   
• Clear interest rate tables – Financial institutions should be obliged to publish transparent rate tables showing the full rate for high-risk borrowers, as well as the reduced rates available for lower-risk borrowers.
   

Greater transparency in pricing and scoring, Piti argued, would compel lenders to take on a duty of improving borrowers’ financial well-being. “If these three pillars are put in place, Thailand will finally have a sustainable and lasting solution to the household debt problem,” he said.