Thai banks stable amid poor outlook elsewhere: Moody's

[webfact]

RISK ASSESSMENT
Thai banks stable amid poor outlook elsewhere: Moody's
The Nation

BANGKOK: -- The Thai banking outlook remains stable over the next 12-18 months as it has been since 2010, according to Moody's Investors Service.

Though Thai banks face two great domestic risks - rising household debt and property prices - the situation in other countries looks worse.

Also on Wednesday, Standard & Poor's Ratings Services warned against threats from asset quality deterioration, shortage of capital or slowing credit growth to banks in the BRICMT - Brazil, Russia, India, China, Mexico and Turkey.

"While economic growth has been slowing moderately, Thai banks are well positioned to withstand potential asset-quality challenges because of their strong capitalisation levels and increasing provisioning coverage," said Simon Chen, an assistant vice president and analyst at Moody's.

"In addition, we expect loans to grow at a more moderate rate, after four years of loan growth having outpaced deposit growth. The slower rate of loan growth will contain and even perhaps reverse the recent deterioration in the banks' loan-to-deposit ratios," he said.

While Thai banks' loan-to-deposit ratios will stay well below 100 per cent, foreign currency loan-to-deposit ratios should remain elevated. However, such loans represent only a fraction of the banks' portfolios and the central bank's reserves.

Moody's said banks will face risks from household indebtedness, which has increased to 79 per cent of GDP as of June from 64 per cent in the first quarter of 2011, and rising property prices.

While much of the household lending has been from government-owned institutions outside the commercial banking system, rising household debt and property prices have increased the banks' vulnerability to adverse shocks.

Moody's, which rates 10 Thai banks, points out that the banks' exposures to residential mortgages and other household loans comprised 35 per cent of the banks' loan portfolios as of the second quarter, up from 30 per cent in 2009.

However, the banks' capitalisation levels remain above regulatory minimums under Moody's stress tests and will benefit from less rapid loan growth.

"We expect profitability in the overall system to remain much the same as current levels in the next 12-18 months, although banks should face pressure on their net interest margins, given the intense competition in the industry," Chen said.

"At the same time, fee-based income is growing from increased investment sales, insurance products and other non-lending products to the growing middle class."

S&P expressed reservations over the health of BRICMT banks

"In addition, we remain concerned about the rising household debt burden, given still low, although increasing, GDP per capita and cyclicality of these major emerging market economies," said Cynthia Freue, a credit analyst.

The expectation of the US Federal Reserve's reversal of its loose monetary policy has hit most emerging markets, pushing financing costs higher and currencies lower, and reducing the pace of global and regional market issuance. The resulting global capital outflow will have varying effects on banks in the BRICMT nations.


-- The Nation 2013-10-25

[slapout]

The Thai banks are reaping millions off of the atm charge aimed at tourists drawing funds from their home country. Then add the local charge to deposit money into an account of a branch, where you actually make the deposit.

Thailand is due another house cleaning which deals with the practices, and charges which are applied within the service portion of the bank services.

[kiwiinasia]

Now why would anyone care about the next 12-18 months?

If I am buying shares/bonds or even making a deposit I want to know about 5-10-25 years.

Moodys must be crap.

[ggold]

Now why would anyone care about the next 12-18 months?

If I am buying shares/bonds or even making a deposit I want to know about 5-10-25 years.

Moodys must be crap.

Not if you're investing in Thailand, the shorter the period the better.

Edited October 25, 2013 by ggold

[Robby nz]

How will things look when the 2.2 trillion bill is passed.

It was said that Thai banks would be expected to supply 60% of that and even more recently the MoF has said Thai banks have enough liquidity to handle the 2.2 trillion.

Which could point to them being expected to provide all of it.

As they have provided all the 350 billion for the flood work

[yoshiwara]

Now why would anyone care about the next 12-18 months?

If I am buying shares/bonds or even making a deposit I want to know about 5-10-25 years.

Moodys must be crap.

Plenty of people want to know including those making longer term investments. Knowing the immediate outlook useful when anticipating making such investments in the coming months.

Most importantly Moodys are saying that the Thai banks are reasonably stable, subject to some important caveats which may lead to weakening. Even though one may think Moodys have underestimated political risks, the report undermines those who think the Thai banking system is on the edge of disappearing down a big plughole.

[marcusd]

How will things look when the 2.2 trillion bill is passed.

It was said that Thai banks would be expected to supply 60% of that and even more recently the MoF has said Thai banks have enough liquidity to handle the 2.2 trillion.

Which could point to them being expected to provide all of it.

As they have provided all the 350 billion for the flood work

Its called the "SHIN DONATION FUND" for the BENEFIT (lol) of the THAI? people.

[JoeThePoster]

So the 10% bounced cheques are nothing to worry about then.

[PeterSmiles]

"In addition, we expect loans to grow at a more moderate rate, after four years of loan growth having outpaced deposit growth.

I'm not sure if those professional lenders that pop out of the ground like mushrooms these days are from the same opinion.

Every other shophouse these days is rebuild and when finished it houses an Easy Money or alike bank, and I doubt this would happen if the thought loaning would slow down.