THURSDAY, March 28, 2024
nationthailand

Firms expected to stall on fund raising

Firms expected to stall on fund raising

Corporate businesses are likely to wait before deciding which route to take in raising funds after Moody's Investors Service's recent warning that Thailand's sovereign credit outlook was at risk due to losses from the government's unmodified rice-pled

While Moody’s rated the Kingdom “Baa1” with a stable outlook, it said the rice-pledging programme was a negative factor that could affect the future outlook.
Kasikornbank executive vice president Vasin Vanichvoranun said yesterday that the warning – as well as concern over the possible ending of the US Federal Reserve’s quantitative-easing programme – could influence the cost of mobilising funds both from overseas markets and domestically.
Should Thailand be given a negative outlook, the cost of funding will be high, he said, adding that commercial banks are not immediately cutting interest rates because of the banking industry’s need to mobilise funds to serve high loan demand in both the private and consumer sectors.
This means that many corporates will likely wait for a clear picture to emerge on interest rates to ensure the minimum impact from fund-raising, he said. And, if customers delayed their decisions on whether to raise cash through loans or via the capital or debt markets, the bank would also be affected.
KBank is increasing its role to that of a comprehensive fund-raising arranger, as it wants to balance growth while maintaining its balance sheet, the executive said.
The corporate business division in the first quarter saw loan growth of only 2 per cent, resulting in outstanding lending of Bt426 billion. The division now expects lending to grow by just 4-6 per cent over the full year.
Vasin said KBank would not provide lending for a corporate deal on its own, as it did not want to carry the full risk from a single customer.
Syndicated loans could be arranged for all corporate customers or, if they preferred another solution, fund-raising through the capital and debt market were the proper choices.
He raised the examples of infrastructure funds and real-estate investment trusts (REITs), which could enable corporates to access finance at reasonable rates.
KBank aims to participate in at least two infrastructure funds with a combined value of Bt10 billion this year, as well as in more REITs in the final quarter.
Apart from focusing on comprehensive fund-raising, the bank’s corporate business division is also placing greater emphasis on transactional banking, for which it sees high potential.
KBank targets 13-17 per cent in income growth for the division as a whole this year, with transactional banking achieving 20-per-cent growth.
KBank sees high potential in the transactional-banking sector, especially via electronic channels, he said.
E-channel transactions rose from 95 million worth Bt13 trillion in 2010, to 172 million transactions worth Bt20.4 trillion last year. This trend has been driven by four main factors, Vasin said.
“Operational effectiveness and efficiency in the current volatile market are needed, opportunities and risks of the emerging market from the introduction of the Asean Economic Community are expected, the consuming class and spending growth are rising thanks to urbanisation, and the access to customers increases from infrastructure development,” he explained.
E-channels will enhance corporate-customer activities by connecting the value chain, leading to an increase in corporate value and a readiness to compete in a challenging market, he added.

nationthailand