Slower lending growth outlook, weaker asset quality as interest rates hike, and heightening competition in the digital banking business are challenges for commercial banks in 2019, says Kasikorn Research Center (K-Research).
The country's cooling economic momentum would lead to slower growth in commercial bank lending, dipping to 5% next year from 6% estimated for this year, said the research unit under Kasikornbank.
Commercial loans are expected to expand 4.5% in 2019, up from 4.2% predicted for this year, based on recovering private investment, said K-Research.
Consumer loan growth is forecast to slow down to 6% in 2019 from 8.5% predicted for 2018, with mortgage and auto loans expected to grow at slower paces at 5% and 5.5%, respectively, in 2019 than 7% and double-digit growth estimated for both sectors in 2018.
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"We expect to see commercial banks keep their guard up in 2019 as asset quality needs close watching amid economic uncertainty and interest rate hikes," said K-Research.
K-Research forecasts the non-performing loan ratio of commercial banks will inch higher to 2.98% late next year from 2.91% estimated for the end of this year.
Small and medium-sized enterprise (SME) loans and mortgages warrant monitoring, it said, adding that bad loans for SME and residential sectors are predicted to rise to 3.42% and 3.7%, respectively, in 2019.
With dimming bad loan prospects and implementation of Basel III in 2019 and the International Financial Reporting Standard 9 in 2020, K-Research forecasts commercial banks' credit costs next year will be on par with this year.
The research unit projects some commercial banks will begin to pass on the central bank's higher rate to fixed deposits, mortgages and auto loans in the first half of next year, and savings and prime lending rate hikes are likely to be seen in the second half of 2019.
The Bank of Thailand is forecast to raise the policy rate one more time next year.
Given the stronger competition from fintech firms and online platform operators in financial services, commercial banks are under pressure to sharpen their competitive edge, expand customer bases and seek new sources of income.
K-Research said commercial banks delivered 4.2% lending growth to 11.5 trillion baht for the first 11 months from the end of 2017, led by commercial and consumer loans.
Kiatnakin Bank, a small commercial lender, performed the best among industry peers with 16.5% loan growth for the January-November period, while Tisco Bank and Standard Chartered Bank Thai saw their lending growth decline by 3.82% and 31.8%, respectively, over the same period.
For the five biggest players, who together hold a market share of 77.3%, total loans outstanding rose 4.12% from the end-2017 to 8.89 trillion baht at the end of November.
Bank of Ayudhya showed the highest loan growth among the large players at 7.39%.
