Thai banks' loan growth could reach 6.7% in 2018

But banks are still reluctant to lend due to credit risk concerns.

On the back of improving economic growth, Maybank Kim Eng projects Thai banks' loans will accelerate to 6.7% in 2018 vs. 4.9% in 2017.

"This seems to be a consensus call as many analysts/banks’ managements also share this view. KBANK, for instance, aims for 5-7% loan growth vs. its 4-6% target this year, also citing higher GDP growth. Key driver for growth is anticipated to come from the corporate segment, driven by government-led infrastructure investment."

Here's more from Maybank Kim Eng:

Loan growth next year, in fact, should be higher but we believe that banks are still reluctant to lend due to fears about credit risk. According to the Bank of Thailand’s (BOT) Senior Loan Officer Survey, banks remained cautious about lending in 3Q17 and are likely to remain so in 4Q17 citing concerns about NPLs.

Despite improving economic growth, we do not see NPLs improving significantly next year due to high amount of restructured loans and slow NPL resolution. The cautious stance is also reflected by the banks’ behaviour as we saw an 29% increase in interbank assets in 9M17 despite a much lower yield at only 1.4% interest, compared to an average 4.6% yield for the sector’s effective interest rate from loans in 2016. We believe the cautious stance should remain in place next year too.