Thailand's higher policy interest rate is poised to be a boon to the banking sector as net interest margins increase, but the move could take a toll on auto lending firms because of their fixed rate charges, say securities analysts.
The rise in the policy interest rate will have a negative effect on banks specialising in leasing and hire purchase loans because these loans have flat interest rates, resulting a slight change in revenue for these banks, said an analyst at Capital Nomura Securities who spoke on condition of anonymity.
Large banks, however, will have greater benefits because their floating-rate assets outnumber fixed-rate assets, the analyst said.
Medium-sized and small banks also offer higher deposit rates than larger banks, so the rate hike will cause a narrower interest spread with higher funding costs for the former, the analyst said.
"We expect that the banks receiving the most benefit from the rate hike are Krungthai Bank, Kasikornbank and Bangkok Bank," the analyst said. "Banks having the most negative impact are Thanachart Bank, Tisco Bank and Kiatnakin Bank.
"However, a one-time rate hike this year will not affect banks' net profit forecast, as analysts have already priced in the move."
The Bank of Thailand on Wednesday joined a global trend by raising the policy interest rate for the first time since 2011, by 25 basis points to 1.75%, aiming to stabilise the economy and build up policy space amid growing uncertainty.
The rate-setters also signalled gradual rate hikes, saying that it would be unnecessary for the rate to continue rising and that they could pause at some future meeting.
Asia Plus Securities analyst Usanee Lewrat said the rate hike adds costs for auto lenders that rely on money markets and bonds as funding sources to the tune of 0.25 percentage points, in line with the quarter-point increase in the policy rate.
But the impact on auto lenders is different, depending on whether title, motorcycle or passenger car loans dominate their lending portfolio, Ms Usanee said.
The effect on motorcycle lenders would be smaller than for auto lenders, as the 25-basis-point increase is not much when compared with their interest margin of 26%.
These companies include Srisawad Corporation Plc and Muangthai Capital Plc.
Among vehicle lenders, those focusing on trucks are expected to be dealt the biggest blow, given their thin interest margins of 7-8%, Ms Usanee said, adding that truck loans make up more than half the portfolio at Asia Sermkij Leasing Plc and Ratchthani Leasing Plc.
"In practice, these companies have tried to lock in funding costs to minimise the effect," she said.
Apinant Klewpatinond, chairman and president of Kiatnakin-Phatra Financial Group, has said the rate rise would hit auto lenders because their product offers a flat rate throughout the loan term.
To avoid the impact, Kiatnakin Bank locked in cheap costs for the long term ahead of the central bank's rate hike to match up with auto loan maturities and diversified its funding sources to maintain yield, Mr Apinant said previously.
A source in auto lending circles said the lenders earlier raised their rates after seeing clear signs that a policy rate hike was ahead.
