The latest data on the Thai banking system (at 14 Thai commercial banks) as of the end of February 2010 showed some improvements in loans. From interviews with many commercial banks, it was found that business sector has, in general, allocated and disbursed higher loans. Meanwhile, consumer loan demand is still increasing in line with improving overall confidence and a recovering economy.
If Thai commercial banks can maintain their loan momentum (as seen in February 2010) through to the end of this year, it is expected that 2010's overall loans in the Thai banking system may grow 10 percent. However, KASIKORN RESEARCH CENTER (KResearch) are maintaining our loan forecast unchanged at 6.0-7.0 percent, because we have found that the higher loans currently seen in the system are partly government sector loans (typically short-term). Meanwhile, loans offered to the household sector have been boosted by technical factors, which are believed to be temporary. If the political crisis eases, a more stable economic recovery will help support loan growth a few months on, thus we may increase our loan forecast later.
Given improving business surroundings and better economic fundamentals, which will pave the way for higher loan demand, each commercial bank's challenge is no longer how to grow credits, but rather how to make they expand fast enough to meet a much more ambitious target of 2010 loan growth. Under these tougher challenges, pricing competition might be more intensified. Although commercial banks have tried to turn away from price wars and given their attention to differentiating products and improving services, it will be practically hard to avoid this pricing competition, especially once started. This will affect the financial status of each bank, and thus the banking system. No matter how the situation proceeds, consumers will receive a windfall from such competition, because they gain greater bargaining power and access to loans in a ‘buyers' market.