Krung Thai Bank faces headwinds over sluggish loan demand

Net loan growth rose 0.9% in January versus a 1.6% increase in December.

Krung Thai Bank (KTB) faces testing times due to slow loan demand brought about by the weakening Thai economy, reports UOB Kay HIan.

Profits are also under threat by tightening net interest margins (NIM) over lending rate cuts and high cost-to-income ratio (CIR).

The lender’s net loan growth rose 0.9% MoM in January this year vs 1.6% rise MoM in December 2019. But new loan demands are likely to mellow in H1 2020 due to COVID-19 effects and weak Thai economic growth. Full-year loan growth is seen to marginally increase 2%, lower than KTB’s target of 3.5%.

NIM is likely to tighten given the minimal loan rate (MLR) cut of 25bp to 5.77% on February 6, the report noted, after the monetary policy committee slashed the policy rate by 25bp to spur economic growth. Further interest rate cuts will likely lower NIMs by 8bp this year.

UOB speculates that KTB might focus on asset quality management and IT improvements for its digital banking platform services this year, rather than growing its lending base.