September, net loans in the Thai commercial banking system rose THB3.76 billion or 0.03 percent over the previous month, reaching THB11.345 trillion. The increase, which was supported by growth in all types of retail loans, resulted in the rise in net outstanding loans by 5.78 percent as compared to September 2017 in spite of the seasonal slowdown of loan growth in the third quarter of the year and lower business loans in line with debt repayment and fund raising via bond issuance to lock financial costs before interest rate hikes. As for SME loans, they slightly increased.
On the deposit side, the overall deposits increased THB3.93 billion or 0.03 percent over August to reach THB12.276 trillion. To achieve effective liquidity management and to control the overall financial costs, bank movements differed in accordance to their particular liquidity status. Amid higher debt issuance and lending amounts, the ratio of net loan to deposit plus issued debt and borrowing (LTD+Borrowing Ratio) eased from 87.63 percent in August to 87.43 percent. This was in tune with the liquid assets to total assets ratio that rose from 21.01 percent in August to 21.30 percent.
For the last quarter of 2018, the seasonal effects will positively affect all types of loans, but business and SME loans could be impacted by the situation of international sectors, especially exports and tourism following certain signals of slowdown at the end of the third quarter. However, retail loan growth will likely be boosted by various factors, including: 1) Home loans – accelerated ownership transfer before the 2018 year-end prior to the effect of the Bank of Thailand's new home loan supervisory measure; 2) Auto hire purchase loans – given the strong demand for new cars; and 3) Unsecured personal loans (credit card loans and personal loans under supervision) – due to price competition and new marketing channels via digital landing platforms.
Looking ahead to the end of 2018, commercial banks will maintain their focus on management of financial cost and liquidity to achieve a balance. These attempts will likely face more challenges amid intensified competition with other savings products that are associated with tax benefits, which are normally the year-end seasonal effects. Banks have to prepare themselves for possible increases in policy interest rates next year, as well.