News Column

SCB tempers expectations for deposit growth

February 17, 2014

By Somruedi Banchongduang, Bangkok Post, Thailand

Feb. 17--Siam Commercial Bank (SCB) has slowed fund mobilisation through deposits, as it does not offer attractive rates for some deposit tiers on the back of strong liquidity management among sluggish loan demand.

Executive vice-president Smith Banomyong said that over the past few years the deposit market has seen fierce competition offering high rates to draw deposit accounts.

But competition appears to have come to an end and SCB has not provided interest rates for deposits between 500 million and 1 billion baht since late last year after the bank's 2014 business plan was revised in accordance with economic circumstances and the ongoing political turmoil.

SCB, the country's third-largest bank in terms of assets, is the first bank to adjust the board rate for deposits improving both liquidity and financial cost management. The interest rate for such deposit tiers is higher than small deposits by 0.1 to 0.3 percentage points.

SCB's targeted 2014 deposit growth of 100 billion baht is a significant decline from last year's 230 billion baht and 250 billion baht in 2012. Its total loan growth for this year is expected to be 7-10%, declining from 11.5%, 19.7% and 22.1% in 2013, 2012 and 2011, respectively.

There is no rate offering for large amount deposits by wealthy customers. This client segment, as a result, has moved to other investment instruments with higher returns. Mutual funds and the equity market are alternatives. In addition, a number of large depositors have moved their deposits from SCB to other banks.

"Some customers still have confidence in state-owned banks despite concerns about lending to the government for the rice-pledging scheme.

"Some state-owned banks offer higher interest rates in the same tiers as private banks," Mr Smith said.

For special deposits, it will focus on the short-term after running a fixed-deposit campaign for four months with interest rates of 2.35% to 2.55% per year, depending on the deposit amount from last month.

Kasikornbank and Bank of Ayudhya (BAY) have also adjusted the board rate for deposits following SCB in order to improve cost management under loan demand deceleration.

Kris Chantanotoke, an executive vice-president of BAY, said banks will slow down deposit mobilisation this year in line with less-than-10% loan growth at each bank.

If the Bank of Thailand keeps the existing policy rate at 2.25%, deposit competition will continue throughout the year.

But if the central bank decides to cut its rate amid the slowing economic momentum, it would reduce the rival trend.

BAY, the country's fifth-largest bank, set growth rates for both loans and deposits at 9% this year.


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Source: Bangkok Post (Thailand)

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