GH Bank lifts rates to raise funds / Bank facing increased rivalry for deposits
Written by Writer on Tuesday, November 11th, 2008
GH Bank lifts rates to raise funds / Bank facing increased rivalry for deposits
WICHIT CHANTANUSORNSIRI
The Government Housing Bank, the country’s largest home mortgage lender, acknowledged that it was facing greater liquidity pressure amid rising competition for deposits and credit risk.
The state bank today raised deposit interest rates across the board by 0.25 to one full percentage point, citing increased competition for funds in the market.
Khan Prachuabmoh, the GH Bank president, called on the Bank of Thailand to push interest rates down and inject greater liquidity into the money markets to reduce competition for deposits.
This in turn would allow banks to cut loan interest rates, benefiting the overall economy.
“Right now, liquidity and non-performing loans are the two greatest issues facing every single executive of the bank. We are monitoring things closely,” Mr Khan said.
Analysts expect the central bank’s Monetary Policy Committee to cut its one-day repurchase policy rate, now 3.75%, by at least a quarter point at its next meeting on Dec 3 in light of easing inflation and slowing economic growth.
Central bank executives insist that liquidity in the overall economy remains plentiful and sufficient for the economy’s needs.
But bankers say that the global economic recession and ongoing political turmoil has raised credit risks across the entire economy, resulting in lenders cutting back credit lines and tightening lending criteria to limit any potential increase in bad loans.
This, however, may have the effect of even worsening the economic slowdown, as companies are starved of credit and consumers cut back spending.
Mr Khan said the MPC did not necessarily have to wait for its next scheduled meeting to act - a rate cut could be taken at an emergency meeting if needed.
Central banks across the globe are aggressively cutting interest rates in recent weeks to break the credit crunch and limit the impact of the recession.
“A rate cut and liquidity injection in the markets will help reduce competition for deposits in the banking system,” Mr Khan said.
GH Bank today is increasing its deposit rates by up to a full percentage point, with special savings deposit rates jumping to 3.25% from 2.25% and one-month fixed deposits raised to 2.75% from 2.25%. Rates for large deposits of over five million baht were increased to 3.5% from 2.75%.
The bank says excess liquidity now amounts to around 40 billion baht, or 8% of its deposit base.
Mr Khan said higher deposit rates in turn would limit the capacity of the bank to reduce lending rates. GH Bank currently charges a minimum retail rate of 7.75% per year.
For the first nine months of the year, GH Bank posted net new lending of 57 billion baht with net profits of 1.67 billion.
Nine-month profits fell 16.63% this year from the same period in 2007, due largely to higher provisioning expenses to comply with the tougher IAS39 accounting standard.
The bank expects new lending this year to amount to 80 billion baht, down from earlier full-year targets of 90 billion. For 2009, the bank has set a new loan target of just 73 billion baht.
Net assets as of Sept 30 totalled 587 billion baht, up 3.88% from the year before. Deposits rose 6.13% year-on-year to 498 billion baht. Non-performing loans at the bank stood at 67.4 billion baht, or 11.8% of total loans.
Bangkok Post
Tuesday November 11, 2008
