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26 Feb 2015

Financial Markets

Liquidity Remains High as Loans Flagged in January(Economic Brief No.3546 Full Ed.)

As of the end of January 2015, total net loans of Thai commercial banks stood at THB10.03 trillion, up over the THB133 billion in December as a consequence of Tokyo-Mitsubishi Bank's acquisition of Bank of Ayudhaya. Without factoring in the effect of that deal, January net loans would drop THB97.1 billion MoM, with over-year growth slowing to 3.12 percent. Meanwhile, deposits, debt issued and other borrowing were posted at THB11.81 trillion, increasing THB129 billion MoM. Exclusive of the effect of the above acquisition, the balance would be THB37.9 billion lower, which equated to a 0.32 percent drop. Over-year growth dipped to 5.18 percent. Without that acquisition's effect, liquidity within the system improved the most in 41 months, as reflected by a lower ratio of gross loans to deposits, debt issued and other borrowing that fell to 84.88 percent, from 88.68 percent at the end of December.
KResearch has assessed the liquidity outlook over 1Q15 and found similar conditions as seen in January, because commercial banks have to deal with arduous tasks in shoring up loan growth, given sluggish signs toward economic recovery. This has limited banks' fund mobilizing to campaigns targeting only certain customer segments to maintain their customer base and replace matured deposits. Price-wise, competition may be greater among medium and smaller banks.

We at KResearch suggest that a close watch will be needed on factors that may have an impact on loan/deposit growth and bank liquidity over the coming months. Those factors include continuity in our economic recovery and the BOT monetary policy stance that could influence rates in the Thai financial market, as well as banks' capital mobilization and liquidity within the system.

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