BBL: Interest hike not a worry
The looming interest rate hike should not deal a blow to loan demand, borrowers’ debt-servicing ability or asset quality, thanks to the country’s robust economic growth, says Bangkok Bank’s (BBL) top executive.
“The pace of the interest rate increase and funding costs will be based on the market and the global economic recovery, as circumstances change in both the local and international markets,” said president Chartsiri Sophonpanich.
His comment came after the minutes of the Bank of Thailand’s Monetary Policy Committee (MPC) June 20 meeting showed that the rate-setting panel extensively discussed the path to a rate hike at the meeting. The committee considered the need for an accommodative monetary policy would start to be reduced, with policy rate increases likely in order to build policy space in the future, especially if economic expansion continues and inflation moves firmly within its target.
At the meeting, the committee voted 5-1 to leave the policy rate unchanged at 1.5%, the level it has been at since April 2015. One member voted for a 25-basis point increase, while member Kanit Sangsubhan was absent. The MPC’s last policy rate hike was in August 2011, when the committee raised it a quarter-percentage-point to 3.5%.
Despite the fastest pace of economic growth in five years, rising 4.8% year-onyear during the first quarter, and headline inflation entering the lower end of the Bank of Thailand’s target band of 1-4% for a third consecutive month in June, Thailand is among the few countries still shrugging off monetary normalisation. Some Asean central banks have already synchronised their monetary policies with the US Federal Reserve.
Mr Chartsiri said there was stronger demand for BBL loans from all business segments, led by corporations, in line with accelerating public investment.
Even though the bank’s loan growth for the five months through May still contracted marginally from the end of last year, the country’s largest lender by assets is maintaining its full-year loan growth target at 5%.
BBL’s loans outstanding amounted to 1.80 trillion baht at the end of May, down 0.66% from the end of 2017.
Loan demand is expected to be stronger for the rest of the year, as a result of robust economic growth, improving private investment, as well as seasonal factors. Positive economic momentum strengthens debt payment ability, so there are no serious concerns about asset quality tied to a rate hike.
BBL shares closed Friday on the SET at 197 baht, up 2.50 baht, in trade worth 624 million baht.