Thai banks' sector loans edged up by a measly 0.5%

Everyone's been disappointed with the sluggish loan demand.

It has been noted that in Thailand, there has been disappointing loan demand on slow economic recovery, with sector loans having grown 0.5% MoM and 3.8% YoY in Feb 2015, supported by corporate and SME working capital loans.

According to a research note from Maybank Kim Eng, TMB, BAY and KBANK reported higher loan growth than others. Auto lenders still posted loan contraction MoM due to weak auto demand as new credit demand could not offset the on-going debt repayment.

Maybank Kim Eng noted that it expects auto loans to recover gradually in 2016 and full recovery in 2017 as it believes the amount of debt repayment will decline significantly in 2017.

Here's more from Maybank Kim Eng:

Deposits grew 0.4% MoM in line with loan growth. We expect sector NIM could be under pressure in 1H15 due to the recent interest rate cut and weak loan demand, especially for BBL as its LDR fell to 82% in Feb 2015 from 87% in Dec 2014.

All banks with high auto exposure still lowered the deposit base by 2-6% YTD given the weak loan demand.

Expect loan demand to rebound in 2H15. We maintain our loan growth assumption of 5.6% this year supported by SME and mortgage loan demand on the high backlog level of condominiums that will transfer this year.

However, we remain cautious on asset quality given slow recovery in private consumption and investment as well as pre-existing high household debt level. KTB is our Top Pick on the better fee income and NIM outlook with an improving asset quality.