Sector loans for Thailand banks increase 5.7% YoY

Better outlook expected in 2H15.

It has been noted that Thailand banks saw weak loan growth in January, with sector loans growing 1.6% MoM and 5.7% YoY in Jan 2015 due to BTMU’s consolidation into BAY. Excluding this item, sector loans fell 0.7% MoM but grew 3.3% YoY.

According to a research note from Maybank Kim Eng, all nine banks under its coverage reported January loan data. KBANK was the only bank that reported positive loan growth MoM, supported by SME loans due to working capital needs.

KKP, TISCO and TCAP posted negative loan growth on the auto loan contraction as new lending remained lower than loan payment. BAY reported strong loan growth due to the consolidation with Bank of Tokyo Mitsubishi UFJ (Bangkok branch).

Note that BTMU had loans of THB220b in Jan 2015. Excluding this item, sector loans grew 3.3% YoY but fell 0.7% MoM while BAY’s loans would drop 1.2% MoM.

Here's more from Maybank Kim Eng:

Small banks saw lower deposit base. All banks, except BBL and KTB, posted deposit outflow in January. This sustained NIM given the weak loan demand. Note that TISCO, TMB and TCAP’s deposit base fell 3-7% MoM while BBL and KTB reported 0.9% and 1.4% MoM deposit growth in Jan 2015.

We see downside risk to NIM of BBL and KTB as their LDR dropped further to 85-87% vs sector average of 95% in Jan 2015.

Expect better outlook in 2H15. We forecast sector loan growth of 6.9% on the back of 4% economic growth this year and believe that loan demand could remain weak in 1Q15 and pick up in 2H15 on the economic recovery.

We like KTB for its undemanding valuation and BBL for its cheap valuation and strong balance sheet.