Thai banks report flat industry loans in February

Deposits up a measly 1.3%.

According to Maybank Kim Eng, Thai banks registered flat industry loans MoM and YTD. However, these were p 8.4% YoY while deposits grow 1.3% MoM and 10% YoY in Feb 14; Loan to deposit drop by 1ppt to 102%.

Here's more:

Weak consumer loan growth in Feb 14. BAY, TISCO and SCB booked two consecutive months of loan growth contractions in Jan-Feb 14.

Meanwhile, KKP and TCAP reported relatively flat overall loan growth for the first two months. This was mainly due to weak domestic auto demand as the Thailand Automotive Industry Association reported a 45% drop in new car sales for the first two months of the year.

Business loans offset weak consumer loans. KBANK, KTB and BBL posted positive loan growth of 0.5%, 0.3% and 0.3% MoM, respectively, in Feb 14. Meanwhile, TMB reported a 0.2% decline in loans due to loan repayments. KBANK and KTB registered the strongest loan growth of 1.5% and 1.3% YTD.

What’s Our View Increased downside risk to loan growth. 2M14 sector loan growth was flat YTD as the ongoing political unrest weakened domestic demand.

Thai banks cut their loan growth targets amid the weak economic growth outlook (SCB: 5-7% from 7-10%, KTB: 4.5% from 7-10% and TMB: 8% from 10%). We see a downside risk to our earnings growth forecasts of 5% in 2014. Note that The Bank of Thailand revised its GDP growth forecast down to 2.7% from 3.0% for this year.

Top picks: KTB, KBANK and BBL. We prefer the banks which are primarily exposed to business loans and have strong balance sheets as they are less likely to be impacted by weak consumer spending.

Our channel checks suggest that despite the end of the Bangkok shutdown, consumer purchasing power has only reached 50% of the pre-protest levels as consumers continue to tighten their spending. Therefore, we remain cautious on the slower-than-expected demand for new loans and the potential for higher non-performing loans.