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Demand for loans may rise as Thai govt pushes for $64.14b bill
Publication Date : 23-09-2013
The push for 2-trillion-baht (US$64.14 billion) borrowing bill is expected to bolster demand for term loans, as some banks have seen corporations proactively preparing to invest in projects to cash in on the new capital-expenditure cycle.
Piti Tantakasem, chief wholesale banking officer of TMB Bank, said last week that those corporations would likely seek term loans to help finance long-term investment.
TMB recently joined Tisco Bank to syndicate a 4-billion-baht construction loan for TPI Polene's power plant, which will support its cement plants.
It is also among four banks to prove a 15-billion-baht construction loan for the Purple Line mass-transit project.
The credit facility for a cement maker shows the private sector is gearing up to expand production capacity to serve the massive construction of the 2-trillion-baht infrastructure project.
GDP used to be driven by exports and domestic consumption, but those engines are too weak now, so public investment is a boon for private firms, he said.
TMB expects its term loans to rise to 50 per cent of the wholesale banking portfolio within five years from 30 per cent currently thanks to the seven-year, 2-trillion-baht investment programme.
The margin on term loans is bigger than on working capital loans.
The demand for term loans should offset the falling demand for working capital loans. TMB expects its working capital loans to stay flat this year.
Lower commodity prices have helped cut operating costs, while domestic consumption is flagging, so manufacturers have no need for loans to support their liquidity.
TMB has been particularly hurt, as about 70 per cent of its wholesale banking portfolio consists of working-capital loans.
TMB has analysed each module in the 2-trillion-baht scheme to screen for businesses that should prosper with the projects, based on machinery importers, contractors and suppliers.
"The business chain will ensure which firms we should give loans to and which are too risky," he said.
Vasin Vanichvoranun, executive vice president of Kasikornbank, said that even though the 2-trillion-baht project was a godsend for the private sector and banking industry, banks should be more selective in their exposure to this industry.
Construction companies and subcontractors will definitely gain from the public investment and will build demand for both working capital and term loans, but the risk for this business is the lack of manpower.
It is too early for corporations to prepare their investment plans to respond to the 2-trillion-baht mega-projects. The electricity-generating projects in focus now are actually being pursued to upgrade productivity efficiency due to intense competition.
Kannikar Chalitaporn, president of Siam Commercial Bank, said the bank would be more cautious and selective in lending. It has assigned the risk-management division to scrutinise what kinds of customers are too risky.
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