Banks tackle liquidity surplus
SCB seeks to put cash to work locally, abroad
With more deposits than loans, commercial banks are awash with liquidity. Now they are seeking ways to control the cost of funds in a bid to maintain profitability.
Among the methods banks use to control these costs are pushing current accounts and savings accounts (CASA), which have low, variable interest rates as opposed to fixed rates, and to stop offering new special deposit packages.
Siam Commercial Bank (SCB) is searching for investment opportunities in both local and international markets as another way to manage the liquidity surplus, president and chief executive Arthid Nanthawitthaya said.
SCB’s cost-to-income ratio of 36.1% in the second quarter was the lowest among the country’s four largest banks by assets. The bank’s CASA represented 62.5% in the April-June quarter, up from 61.5% in the final quarter last year and 58% over the same period last year.
The other large banks are Bangkok Bank, Krungthai Bank and Kasikornbank.
Mr Arthid said SCB is earmarking a large budget to improve its core banking business under the SCB Transformation scheme to support long-term sustainable growth. The budget amount is yet to be finalised.
The country’s third-largest lender by assets kicked off SCB Transformation running through 2020 in April last year to sharpen its competitiveness in the face of rapid change in the global environment with the rise of financial technology.
The first phase of the scheme is aimed at improving the bank’s service quality by reducing customer complaints and increasing the number of new customers in each business unit.
Kasikorn Research Center (K-Research) said the excessive liquidity of 14 commercial banks fell slightly in June from the previous month, thanks largely to higher lending.
Their combined lending in June rose to 10.5 trillion baht from 10.5 trillion in May, the research house said.
The 14 commercial banks’ total deposits also fell marginally to 11.2 trillion baht in June from 11.2 trillion in the previous month.
K-Research said the increase in higher gross loans to deposit and borrowings to 91.4% in June from 90.9% in May was another indicator that the 14 commercial banks’ liquidity had tightened marginally.
For the first six months of 2016, the commercial banking industry’s cost-toincome ratio fell to 42.5% from 43.9% over the same period a year before.
Kiatnakin Bank’s chief executive Apinant Klewpatinond said the bank would concentrate on putting money into highyield financial instruments to improve comprehensive income and reduce the costs of funds in the second half.
“Although the bank enjoyed a wider spread [between deposit and loan rates] and recorded a better net interest margin due to the fixed-rate charge of auto loans, it didn’t come from real capability in doing business,” Mr Apinant said, adding that the bank plans to focus more on high-margin loan products.