The comparison of loans to deposits at the six biggest commercial banks in the first four months of the year suggests a slow economy and excess liquidity.

The ratio in the period barely changed from its December 2006 level, according to Kim Eng Securities.

The figures show loans account for 82 per cent of total deposits, or a ratio of 0.82, indicating slow economic activity and excess bank liquidity.

Bangkok Bank, Krung Thai Bank, Siam Commercial Bank, Kasikornbank, TMB Bank and Bank of Ayudhya together control about 70 per cent of commercial-bank lending.

As of April, loans accounted for 82.07 per cent of all deposits. In December last year it was 82.54 per cent, Kim Eng said in a research note.

In a healthy economy banks should have as much as 85-90 per cent of deposits out in loans, Kim Eng vice president Sukanya Udomvoranun said.

The company's research showed loan-to-deposit ratios remained low even as deposits were not growing. This is, it said, because of the poor economy.

"Bank lending has been slowing over the period. Therefore there is no need for high deposit mobilisation," Sukanya said.

She was hopeful the comparison of loans to deposits would rise around to 85-86 per cent by the end of the year as economic recovery started to kick in.

During the pre-1997-crisis period commercial banks benefited from the Bangkok International Banking Facility. They could tap low-interest foreign funds to finance local demand.

There was strong lending growth in some sectors, including property. This caused a bubble and saw bank non-performing loans increase.

At that time, bank loans accounted for as much as 120 per cent of deposits.

Kim Eng said bank lending could increase in the second half of the year, driven by two factors, state spending and an improvement in the political climate. Interest-rate cuts will boost consumer confidence, too, it said.

Kim Eng forecast commercial-bank loan growth this year at 6 per cent, with the main contributors Siam Commercial Bank, Kasikornbank and the Bank of Ayudhya at 14 per cent, 8 per cent and 7 per cent respectively.

Despite low lending growth in the first quarter, banks still maintain their lending targets.

Kasikornbank president Prasarn Trairatvorakul said it maintained a loan-growth target of 8-13 per cent this year. But, he said it was possible growth could fall to the lower end of the range following first-half lending performance indicating narrow growth. Deposits for the first five months grew more than loans.

"Loans to deposits right now has increased to around 86 per cent from 77-78 per cent in the first quarter. The current ratio is not bad, but it would be better if it rose to 90 per cent," he said.

Siam Commercial Bank executive vice president Sarunthorn Chutima said its loans-to-deposits comparison was "satisfactory, although it is quite low".

With the current slow-down Sarunthorn said the bank had to be more cautious in approving loans to prevent NPLs from rising in an uncertain environment.

According to bank data, all the big six showed a slight reduction in loans to deposits over the period, except for TMB Bank. Its loans were 94.15 per cent of deposits in April, up from 90.16 per cent at the end of last year.

Krung Thai, the country's largest state-owned bank, posted a significant decrease in loans to deposits, from 91.57 per cent for all of last year to 85.68 per cent in April this year.

The other four banks recorded slight reductions. At Bangkok Bank loans accounted for 72.44 per cent in April compared with 72.59 per for last year.

At Siam Commercial, 81.9 per cent of deposits are lent compared with 81.99 per cent last year. At Kasikornbank the figure is 85.18 per cent compared with 85.88 per cent, and Bank of Ayudhya has 82.07 per cent of deposit committed in loans.

Somruedi  Banchongduang

The Nation