FIDF levy to lower banks' NIM
Commercial banks' net interest margin (NIM) is expected to remain flat or lower in the third quarter, as Financial Institutions Development Fund-related contributions will spark competition against state-owned banks, said Tisco Securities.
The securities house foresees the migration of funds from bills of exchange to deposits and debentures. In the first quarter, NIM already dropped by 9 basis points from the previous quarter.
On May 11, the Bank of Thailand announced that commercial banks which are covered by the Deposit Protection Agency must pay 0.46 per cent of the combined value of their deposits, bills of exchange, bonds and other assets. Only bonds counted as tier-1 and tier-2 capital are exempted from the scheme.
State-owned banks are also required to contribute a similar rate to a national development fund.
Tisco Securities viewed that competition for deposits would heighten if the state-owned banks' contribution is lowered.
"A rate hike, expected in the fourth quarter of this year, should ease this impact. Overall, commercial banks' NIM should drop by 13 basis points throughout 2012," it said.
