No big profits for banks, leasing companies after BOT places ceiling on interest rates

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No big profits for banks, leasing companies after BOT places ceiling on interest rates

By The Nation

 

 

The profits of commercial banks and non-banking entities may be under pressure now that the Bank of Thailand (BOT) has issued measures to help debtors.

 

The central bank recently ordered them to cut down the interest rates they charge for credit cards, personal credit and hire purchase by 2 to 4 per cent in a bid to help people struggling with debt due to the Covid-19 crisis.

 

Anekpong Putthapiban, assistant director at Asia Plus Securities, said BOT’s move may have an adverse impact on commercial banks’ net interest margin due to the decline in real interest rate depending on the number of debtors participating in these measures.

 

"For every 0.10 per cent drop in net interest margin, banks’ profit forecast this year will decrease by about 5 per cent,” he said.

 

He also said that for every 1 per cent interest rate cut by leasing companies, such as Aeon Thana Sinsap (AEONTS), Srisawad Corporation (SAWAD) and Muangthai Capital (MTC), their net profit forecast this year will drop by 3 to 9 per cent.

 

"AEONTS’s net profit will be affected by the new interest rate ceiling on credit cards because they charge approximately 20 per cent, but the new interest rate ceiling is 16 per cent," he said. "However, the impact on SAWAD and MTC's net profit are limited because they charge for personal loans at 24 per cent, which is less than the new interest rate ceiling of 25 per cent.”

 

He advised investors to avoid investing in leasing companies, because most leasing firms’ stock prices rose to its base value and received a negative factor from BOT's interest rate control measures.

 

Meanwhile, a stock analyst at Yuanta Securities said BOT's measures will affect the profit earned from credit-card interest the most.

 

"Therefore, we expect Krungthai Card and AEONTS's profit forecast this year to drop by 4.1 per cent and 2.1 per cent respectively," the analyst said.

 

Source: https://www.nationthailand.com/business/30389877

 

-- © Copyright The Nation Thailand 2020-06-19

 

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[fxe1200]

Compared to European banks the rates a still way to high. What even is worse, that all these pawn shops fleece their uneducated customers big time, and are not being controlled by the government at all.

[Bender Rodriguez]

give 1 percent interest or less on deposits, but still charge till 25+ percent on cash cards ?

[connda]

Omg!  The poor banks!  How will they endure?

Let's see.  In a functioning world the banks take money from depositors, pay depositors a fair interest rate for their deposits, then loan out the money without engaging in usury an by mitigating risk by not lending to those who would have difficulty paying back the loan. 

In the post 2008 financial world, banks take money from central banks, they could care less about deposits, they pay next to nothing to depositors, and then loan out money at usurious rates to anyone with a pulse, and they could care less about mitigating risk as they know that their government will bail them out when non-oerforming loans destroy their balance sheets as well as their governments allowing them to simply "take" their depositors money as well.  And it seems all governments are on-board with that model which begs the question, "What have the leadership gotten out of that deal?" 

The system is broken.  It has been for awhile.  The move to cap interest rates is unusual in that government officials tend to side with banks over their citizens in this Brave New World.

[connda]

3 hours ago, Bender Rodriguez said:

give 1 percent interest or less on deposits, but still charge till 25+ percent on cash cards ?

And the government does nothing to protect consumers from these usurious policies.  It's criminal.

[sammieuk1]

What is that sound I hear you say its "kerching" up goes the Baht again in this mysterious land ????