Net loans in March 2018 grew at a slower pace MoM, up by THB19 billion from February or 0.17 percent to THB11.07 trillion. Nonetheless, the overall lending in 1Q18 continued to expand well YoY, even though the beginning of the quarter was the period when borrowers had to repay their debts from credit card and personal loans incurred during the year-end spending spree season. An increase in lending this quarter was mainly attributed to a rise in corporate, housing and auto loans, while SME loans saw a slight increase.
Deposits in March 2018 increased by THB58 billion or 0.47 percent MoM to THB12.24 trillion, up 6.42 percent YoY and 1.17 percent from the end of last year. The rise in deposits surpassed loan increase, reflecting the commercial banks' effort to manage their financial liquidity, while the cost of funds has yet to rise, to prepare for more loan approvals and further business operations. Commercial banks have gradually reduced the ratio of high-cost borrowing to manage their overall financial costs. In general, the commercial banks' financial liquidity has eased mildly in the first quarter with LTD+Borrowing ratio at 85.77 percent and the liquid asset-to-total asset ratio rising to 22.25 percent.
Loans in the first quarter recorded a satisfactory increase over-year (+4.59%YoY), thus likely propelling loan growth in 2Q18 to reach 4.6 percent as projected by KResearch. Amid the recovery of Thai and global economies, more revenues should be circulated in exports and tourism, contributing to the performance of the business sector which constantly requires funds. The fact that deposit growth outpaced an increase in bank lending has partially reflected the commercial banks' financial liquidity management (while deposit cost has not moved up). With regard to challenging factors for 2Q18, close attention should be paid to an impact from a rise of Thai bond yields (in alignment with the global trend) which may increase the costs of upcoming savings products. In addition, a reduction of digital banking transaction fee, effective in 2Q18, may dent the non-interest income of commercial banks in a later stage.