Banks must learn to share their cost benefits with customers

[webfact]

BURNING ISSUE
Banks must learn to share their cost benefits with customers
SASITHORN ONGDEE

BANGKOK: - WHO will be next to follow Kasikornbank (KBank) and Siam Commercial Bank (SCB) in introducing interest rate cuts after the Thai central bank recently convinced them to do so?

On April 29, the Bank of Thailand (BOT) signalled a downward trend for interest rates in the financial market by slashing its overnight lending rate by another 25 basis points to 1.5 per cent after it had cut 25 basis points in March. Yet, none of the commercial banks took the BOT's hint until KBank's announcement on Wednesday to spearhead its loan rate cuts.

Kbank, one of the country's top five commercial banks by assets, is treading a bold path by announcing it would introduce cuts in various loan rates in a range of 13-25 basis points, effective from today. Initially, the measure will partly trim the bank's revenue, as the bank has not decided yet when to cut its deposit rates.

According to KBank's new rate cuts, the minimum loan rates will be 6.5 per cent per annum, the minimum overdraft rate will be 7.37 per cent and minimum retail rate will be 7.87 per cent.

KBank chief executive officer Banthoon Lamsam conceded at an urgent press briefing that this would have a negative effect on the bank's revenue, and result in a possible drop in the bank's share price.

However, Siam Commercial Bank on Wednesday also released its statement on loan rate cuts, offering its customers loans with an interest cut of 10-30 basis points. The minimum loan rate for good customers has been cut to 6.525 per cent annually while the minimum retail rate was cut by 30 basis points to 7.82 per cent.

The two banks' moves came after the Thai Bankers' Association met with BOT Governor Prasarn Trairatvorakul on Tuesday, who requested their cooperation in passing on the central bank's monetary easing policy to the customers apart from helping small and medium-sized enterprises (SMEs) with more loans or debt rescheduling.

If I were a shareholder of KBank and SCB, I can't say I would be too pleased with the banks. But I would also be unhappy if I was borrowing from other banks.

Once the banks had gained a lower financial cost from the BOT's policy-rate cut, which is implied in the one-day repurchase rate, they seemingly looked over their customers to pass on the cost push (downward trend) to them.

"Money", in principle, is not different from other products and services such as oil fuel, electricity, and transport fees in that the prices could move up and down in response to costs. When the cost is high, the price is high. But when the cost is low, the price should be low too.

The Thai banking sector has been one of most consistent outperforming sectors, with high profit growth despite the country's sluggish economy where small and medium enterprises with a less competitive edge - in particular access to liquidity - are normally hit first.

In the last 10 years, the Thai banking sector has recorded a combined net profit of Bt1.24 trillion, at an average of Bt124 billion a year, with a net interest margin of 2.84 per cent, according to an article posted on the ThaiPublica website. In addition, the banking sector (the eight listed banks) still enjoyed a combined net profit of Bt47.65 billion in the first quarter, up 0.16 per cent year on year and 5.2 per cent quarter on quarter, said a KGI Securities (Thailand) research.

They are obviously doing well. Doesn't it also explain the situation where the banks are charging an exorbitant price for their products?

Is it fair for the banks to enjoy a high spread on interest rates, which mostly translates into a big boost in their revenue, while the customers bear the high cost of loan interest rates?

Source: http://www.nationmultimedia.com/politics/Banks-must-learn-to-share-their-cost-benefits-with-30260676.html


-- The Nation 2015-05-22

[BSJ]

The banks around the world could treble the interest paid to customers and still make large profits. Instead they prefer to make absurd profits and in a way cheat the small depositors out of some interest. That's the bastard banks for ya!

[X pat]

Greed for lack of a better word is what keeps Thai banks working.

[ebonykap]

Greed for lack of a better word is what keeps Thai banks working.

[maidee]

will they follow the european / american banks and giving near to 0% interest for the people who try to save a buck for the old days ?

so thus making people gamble on stocks or spending money for FACE ?

[webfact]

State banks urged to cut loan rates to stimulate economy



BANGKOK: -- State banks are urged to lower their lending rates to stimulate economy.

The call for lower lending rates was made by the director of the Economic and Business Forecast Center at the University of the Thai Chamber of Commerce (UTCC), Mr. Thanawat Polwichai.

Mr Thanawat said UTCC remained confident of the economic growth with its forecasted 4% economic growth for this year although several state and private think tanks have adjusted their projections down to nearly 3%.

He said with confidence that the lowering of interest rate would help boost economy and ease the business sector’s financial burden.

He said a cut of lending rate by 0.1 percent could help the business sector to save 10 billion baht a year in operating cost.

Source: http://englishnews.thaipbs.or.th/state-banks-urged-to-cut-loan-rates-to-stimulate-economy


-- Thai PBS 2015-05-22

[angiolo]

If one borrows , one must pay back , even at a low interest.. SOOO more Thais in deep debt ?

[Mango Bob]

Thai banks hate to lower their interest rate and lose money. Just look at Thai Banks profits over they year. There charge a fee if you fart in their office.

[fred Kubasa]

Who the hell came up with this ridiculous idea ? Sharing our ill gotten gains with customers ? This could weaken our double digit,

profits and, " Oh, my God " ! -- force the order cancellation of my new Lamborghini " !

[ggt]

Banksters (Banker + gangsters)...control the ebb and flow of money around the world...the idea is to extract as much profit from the masses as possible without causing a revolt against their questionable practices...

You must have not gotten the memo...

[johnh869]

The banks around the world could treble the interest paid to customers and still make large profits. Instead they prefer to make absurd profits and in a way cheat the small depositors out of some interest. That's the bastard banks for ya!

Amen Brother!!!!!!!!!!

[phoenixdoglover]

When personal debt is so high, and loan performance poor, and the economic outlook in Thailand uncertain, why would the commercial banks in Thailand reduce their loan rates?

It's the government's responsibility to take stimulative actions for the economy.

The country begs for short term capital expenditures for the existing road and rail networks.

"Toilet cleaning day" is not the answer.

[rickudon]

The Thai banking system is not very competitive. Savings interest low. loan rates a bit high, and fees for everything. In the UK, if you shop around, you don't have to pay fees and also get some nice interest rates (although only on limited balances). I make far more out of my UK banks than i could for similar balances in Thailand. Just requires a little bit of research and organisation of cash flows.

[SABloke]

I'd be happy if they stopped charging me for using my bank's ATM out of province. I would love to know how much money they get daily from that BS. 4 million? 10?

[rubl]

When personal debt is so high, and loan performance poor, and the economic outlook in Thailand uncertain, why would the commercial banks in Thailand reduce their loan rates?

It's the government's responsibility to take stimulative actions for the economy.

The country begs for short term capital expenditures for the existing road and rail networks.

"Toilet cleaning day" is not the answer.

When the BoT reduces its overnight lending rate valid for the banks, wouldn't it make sense banks pass on the reduction to their customers, rather than keep it. The 'poor loan performance' is already calculated into various rates and reservations, no need to generate more buffer. Of course if lending practises still require such, maybe the BoT should investigate compliance of the local banks to Basel-I/II/III and so.

[phoenixdoglover]

When personal debt is so high, and loan performance poor, and the economic outlook in Thailand uncertain, why would the commercial banks in Thailand reduce their loan rates?

It's the government's responsibility to take stimulative actions for the economy.

The country begs for short term capital expenditures for the existing road and rail networks.

"Toilet cleaning day" is not the answer.

When the BoT reduces its overnight lending rate valid for the banks, wouldn't it make sense banks pass on the reduction to their customers, rather than keep it. The 'poor loan performance' is already calculated into various rates and reservations, no need to generate more buffer. Of course if lending practises still require such, maybe the BoT should investigate compliance of the local banks to Basel-I/II/III and so.

Not if business uncertainty in the past year had increased. There is a case for that guarded outlook.

In other economies the relationship between central bank rates and consumer rates is not especially strong. This is the case in the US over the past 10 years.

The central Bank rate would be expected to have an impact on inter-bank loan rates, and large commercial paper; not so much on consumer rates.

Besides, the BOT has just been fiddling in very small increments. This sends a weak signal to the commercial banks. Hence, no bold action on their part.

Edited May 23, 2015 by phoenixdoglover

[Strangebrew]

But on the bright side mentioned banks expect more farangs to die than normal this year so losses will be made up by keeping there assets "Thainess" baby it is about the baht nothing but the baht so help themselves. Oh coming soon new fees for services like talking to teller 5 baht vp 10 baht bank manger 50 baht plus lunch. Want change 100 baht handling fee.