Banks may cut targets for lending
Move depends on length of conflict
Bangkok Bank, the country's largest bank, could revise downward its lending growth target for the year if the political conflict is prolonged, a bank executive said yesterday.
Bangkok Bank's growth target for 2006 is 6-7 per cent.
The source, who asked not to be named, said lending growth had showed signs of a slowdown as clients, both local and foreign, have delayed their decisions on taking out loans.
Overseas investors are in a wait-and-see mode about Thailand's political situation. Bangkok Bank is therefore closely monitoring the conflict.
Bank president Chartsiri Sophonpanich said the target would remain intact for the time being, but if political tension is prolonged, Bangkok Bank would review its lending growth.
Kasikornbank president Prasarn Trairatvorakul said his bank would not revise its loan growth targeted for the year, set in a wide range of 6-9 per cent.
"If political tension is prolonged and hits the bank's loan expansion, our lending will probably head for the lower-end target of 6 per cent. Otherwise, if political factors do not much affect the bank's business, our loan growth target is likely to reach the upper range," he said.
Kasikornbank has set its target at around 1.5 times the country's economic growth rate. The bank has adjusted loan growth for this year from 4.5-5 per cent to 4-5 per cent.
Moreover, Prasarn said the bank was closely monitoring the current political situation that changes day by day. Therefore, it is quite difficult to forecast a long-term outlook.
Bangkok Bank also normally sets its annual loan growth target at around 1.5 times growth in gross domestic product. It forecast GDP growth for this year at between 4 and 4.5 per cent. Therefore, the bank's loan expansion goal is 6-7 per cent.
The manager of the Macro Economic Analysis Centre of Bangkok Bank, Bunluasak Pussarungsri, said the bank would revise its estimate of the country's GDP growth rate next week, mainly taking into account the political situation.
"If political uncertainty is prolonged to the second half of the year, GDP growth is likely to fall to lower than 4 per cent. But if it ends within the first half, the growth rate would be unchanged," he said.
Several businesses have expressed concern that the political conflict will have a negative impact on economic growth. Some shopping malls and fairs have witnessed a drop in consumer spending in the first two months of the year, while new investment has reportedly been halted due to uncertain political conditions.
Amid a high inflation environment, lending rates have been on the rise, which will in turn reduce borrowing capability. Some banks now anticipate the minimum lending rate (MLR) - the rate that banks charge their prime clients - will rise above 8 per cent.
Caretaker Finance Minister Thanong Bidaya sees the situation differently. He said yesterday that the MLR should not exceed 8 per cent due to an increase in domestic liquidity.
He predicted that if the US Federal Reserve delayed further rate increases in the next two months, foreign funds would flow into the country.
Still, as commercial banks are chasing new deposits by offering extraordinarily high term rates, this could deplete liquidity in the market.