The Bank of Thailand conducts a quarterly credit condition survey to review opinions of senior loan officers from financial institutions. It helps the Bank to be more efficiently and effectively in understanding and analysing developments of credit conditions as financial institutions play an important role in transmitting monetary policy and maintaining financial stability. The Bank has been exploring how the surveys are conducted in the light of the other central banks' experience. The questions in this survey are divided into 3 aspects as followed: 1) Supply for credit which is related to the tightness of credit standard for granted loans, factors affecting credit standard as well as credit conditions and terms. 2) Demand for credit which shows conditions and factors that affect the demand for credit. 3) Outlook for credit approval in the next quarter to outline the tightness of credit standard, demand for credit as well as concerns regarding the quality of credit. Besides, special questions may also be raised occasionally.
This survey was first launched in January 2008, with the aggregate results of 2007 Q4 being published in 2008 Q1. The Bank of Thailand has cooperated with 25 Thai commercial banks, branches of foreign commercial banks and specialised financial institutions (SFIs), covering more than 90 per cent of total credit in the financial system.
This report can be accessed through http://www.bot.or.th/English/EconomicConditions/Thai/Pages/CreditCondition.aspx
Disclaimer: This report does not necessarily reflect the Bank of Thailand’s or any one financial institution’s view. Monetary Policy Committee uses this report, together with information from other sources in assessing and analysing economic conditions.
For additional information, please contact: Dr. Saovanee Chantapong Ms.Thanyalak Vibulsrisajja
Team Executive, Economic Intelligence Team Tel: 0-2283-6131 Economist, Economic Intelligence Team
Tel: 0-2283-5646
Domestic Economic Department, Monetary Policy Group Address:
273 Samsen Road, Phra Nakhorn, Bangkok 10200
Fax:
0-2282-5082
BOT’s Website:
www.bot.or.th
Report on Credit Conditions of Financial Institutions in the First Quarter of 2010 and Outlook for the Second Quarter of 2010* Overview of the Results∗ In 2010 Q1, demand for all types of corporate loans increased from the previous quarter, in line with the expectation in 2009 Q4. Demand for both large corporate and SME loans increased, following the demand for working capital, inventory build-up and investment, as a result of improved order books from both domestic and foreign markets. Demand for housing loans in 2010 Q1 increased marginally from the previous quarter, following economic recovery, low interest rate policy, and consumers’ decision to accelerate registration and transfer of their house purchase in order to obtain benefits granted from the property stimulus measures which were supposed to be terminated at the end of March 2009. Demand for credit card and other consumer loans increased, especially for car leasing and durable goods following higher consumer confidence and attractive loan conditions. Overall credit standards for corporate loans remained broadly unchanged, in line with their expectation in 2009 Q4. Respondent financial institutions viewed that risk perception regarding general economic conditions and outlook for industry had improved continuously. This resulted in somewhat less stringent conditions and terms, as reflected in a narrower margin for average loans to both large corporate and SMEs since 2009 Q2. However, there were signs of tight liquidity conditions observed in this quarter. Credit standards for housing loans continued to be loosened, following higher competition among financial institutions and continued improvement in housing market prospects. In contrast, credit standards for credit card and other consumer loans had been slightly tightened, contrary to the expection of easing credit standards in 2009 Q4, owing to concerns about credit worthiness of borrowers, cost of funding, and collateral. As for 2010 Q2, respondent financial institutions anticipated an increase in demand for all types of corporate loans, following both domestic and global economic recovery, which in turn, stimulate production and investment. Demand for housing loans were expected to decrease after real estate transactions had been accelerated in 2010 Q1, along with the adverse impact from political uncertaintiy, which would probably lead consumers to postpone house purchase. Meanwhile, demand for credit card and other consumer loans would continue to expand, following higher consumer confidence and demand for consumption. Respondent financial institutions anticipated credit standards for all types of loans to be less stringent, as risk perception regarding general economic conditions and outlook for industry seemed to improve. In addition, other contributing factors were higher competition among financial institutions, and increased Loanto-Value ratio (LTV) and Loan-to-Income ratio (LTI).
* Notes: 1) The Bank of Thailand conducts a quarterly credit conditions survey compiling senior loan officers’ opinion on bank lending practices. In the April 2010 survey, the Bank of Thailand received feedbacks from a total of 22 banks, comprising of 14 Thai commercial banks, 4 branches of foreign banks and 4 Specialised Financial Institutions (SFIs), covering about 92 per cent of total credits in the banking system. 2) Net percentage balances were calculated by weighting their market share in terms of outstanding loans of the respondent financing institutions, whereby negative balances indicate credit contraction or tightening of credit policy, net percentage balances = 0 indicate unchanged credit growth or credit policy and positive balances indicate credit expansion or easing of credit policy. Report on Credit Conditions of Financial Institutions in the First Quarter of 2010 and Outlook for the Second Quarter of 2010
3 1. Corporate Loans (Loans or Credit Lines to Enterprises) In 2010 Q1, demand for all types of corporate loans increased from the previous quarter, in line with the expectation in 2009 Q4. Demand for both large corporate and SME loans increased, following the demand for working capital, inventory build-up and investment, as a result of improved order books from both domestic and foreign markets. In addition, demand for corporate loans increased significantly in both wholesale and retail trade, and manufacturing sectors, particularly in food and beverages, chemical products, rubber and plastic products and metal industries. This evidently reflected a recovery in private consumption as well as production for both domestic and foreign markets. Furthermore, low interest rate was still a contributing factor to corporates’ demand for investment, especially for large corporates. Figure 1: Demand for Corporate Loans 100 Large
50
SMEs
Overall
0
Realized demand for Overall
Expected demand for SMEs
Expected demand for Overall
2008
2009
2010
2008
2009
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
Realized demand for SMEs
Expected demand for LEs
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
-100
Realized demand for LEs
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
-50
2010
2008
2009
2010
Source: BOT's Survey on Credit Conditions, April 2010.
Apart from bank loans, it was noted that large corporates also relied on alternative financing sources, particularly through debt securities. Those issued securities were mainly concentrated in financial intermediaries, energy and real estate sectors. Figure 2: Factors affecting large corporate loan demand
Figure 3: Factors affecting SMEs loan demand 100
Inventory build-up
2008
2009
2010
2008
2009
2010
Source: BOT's Survey on Credit Conditions, April 2010.
2008
2009
2010
Inventory build-up
2008
2009
2010
2008
2009
2010
2008
2009
Source: BOT's Survey on Credit Conditions, April 2010.
In 2010 Q1, credit standards for corporate loans were broadly unchanged, in line with the expectation in the 2009 Q4. The respondent financial institutions viewed that risk perception regarding general economic conditions and outlook for industry had improved continuously. In this quarter there were signs of tight liquidity conditions observed, corresponding to expansion in loan. There had been somewhat less stringent conditions and terms for loan approval, as reflected constantly in a narrower margin for average loans to both large corporate and SMEs since 2009 Q2. In addition, respondent financial institutions reduced their non-interest charges for SME loans. Overall, approval rate for all types of corporate loans increased from the previous quarter. However,
Report on Credit Conditions of Financial Institutions in the First Quarter of 2010 and Outlook for the Second Quarter of 2010
Q1
Q4
Q3
Q2
Q1
Q4
Q3
Q2
Q1
Q1
Q4
Q3
Q2
Q1
Q4
Q2
Q1
Q1
Factors affecting SMEs loan demand
Q4
Q1
Q4
Q3
Q2
Q1
Q4
Q3
Q2
Q1
Q1
Q4
Q3
-100 Q2
Q1
Q4
Q3
Q2
Q1
Q1
Q4
Q3
Q2
Q1
Q4
Q3
Q2
Q1
Factors affecting large corporate loan demand
Q3
-50
Q2
-50
Q1
0
Q4
0
Q3
50
Q2
50
-100
Working capital
Fixed investment
Q1
Working capital
Fixed investment
Q3
100
2010
4 respondent financial institutions remained somewhat cautious towards high risk loans for all types of corporate loans, as reflected in a continued wider margin for high risk loans. Figure 4: Credit Standards (Corporate Loans) 100 Large
50
SMEs
Overall
Realized credit standard for LEs
Realized credit standard for SMEs
Realized overall credit standard
Expected credit standard for LEs
Expected credit standard for SMEs
Expected overall credit standard
0
2008
2009
2010
2008
2009
2010
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
-100
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
-50
2008
2009
2010
Source: BOT's Survey on Credit Conditions, April 2010.
In 2010 Q2, respondent financial institutions perceived that loan demand for all types of corporate loans would increase, following both domestic and global economic recovery, which in turn, stimulated both production and investment. Respondent financial institutions anticipated a less stringent credit standards for all corporate loans, however they would remain cautious in granting loans to several sectors such as tourism and hotels, real estate, as well as textiles and garments sectors. 2. Consumer Loans (Loans to households) Demand for housing loans in 2010 Q1 increased marginally from the previous quarter, following high competition through marketing strategies, both in terms of attractive loan conditions and quick loan approval process, improved prospects in housing market, and low interest rate. Furthermore, consumers also accelerated registration and transfer of their house purchase, in order to obtain benefits granted from the property stimulus measures, which were supposed to be terminated at the end of March 2009. Figure 5: Demand for Consumer Loans 100 Housing
Credit card
Others
Realized demand for housing loans Expected demand for housing loans
Realized demand for credit card loans Expected demand for credit card loans
Realized demand for other loans Expected demand for other loans
50
2008
2009
2010
2008
2009
2010
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
-100
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
-50
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
0
2008
2009
2010
Source: BOT's Survey on Credit Conditions, April 2010.
Report on Credit Conditions of Financial Institutions in the First Quarter of 2010 and Outlook for the Second Quarter of 2010
5 Demand for credit card1 and other consumer loans increased, higher than the expectation in the previous quarter, following higher consumer confidence and attractive loan conditions, especially for other consumer loans. Demand for other consumer loans increased, as reflected in department stores’ sales and consumption of durable goods, especially commercial cars, after consumers had postponed their consumption in the preceding year during the economic downturn. This corresponded to a 54.8 percent expansion in domestic commercial cars’ sales. In 2010 Q1, credit standards for housing loans continued to be loosened, following higher competition among financial institutions and continued improvement in housing market prospects. In addition, respondent financial institutions continued to ease their conditions and terms for loan approval, as reflected in a reduction in non-interest charges, and an increase in Loan-toValue ratio (LTV). In contrast, credit standards for credit card and other consumer loans had been slightly tightened, owing to concern about credit worthiness of borrowers, cost of funding and balance sheet constraints, as well as collateral. It was noted that Loan-to-Income ratio (LTI) for credit card loans had been reduced slightly after showing an increase in the previous quarter, suggesting more cautious operation in credit card business of respondent financial institutions amid intense competition. Meanwhile, LTI and maturity for other consumer loans had been slightly loosened, compared to the previous quarter. Figure 6: Credit Standards (Consumer Loans) 100 50
Housing
Credit card
Realized credit standard for housing loans Expected credit standard for housing loans
Realized credit standard for credit card loans Expected credit standard for credit card loans
Others Realized overall credit standard Expected overall credit standard
0
2008
2009
2010
2008
2009
2010
Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
-100
Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
-50
2008
2009
2010
Source: BOT's Survey on Credit Conditions, April 2010.
Looking ahead, respondent financial institutions anticipated that demand for housing loans would decrease in 2010 Q2, owing to prolonged political uncertainty, which might potentially induce some adverse effects on economic conditions in the next period. Meanwhile, demand for credit card and other consumer loans would continue to expand, following favourable trend of economic growth, strenghtened employment conditions, and improved farm income. Credit standards for all types of consumer loans were expected to remain broadly unchanged from 2010 Q1.
Economic Intelligence Team Domestic Economic Department Monetary Policy Group April 2010
1
This survey does not include non-banks financial institutions such as Krungthai Card Public Company Limited, Krung Sriayudhya Card Company Limited, Aeon Thana Sinsap (Thailand) Public Company Limited, Easy Buy Public Company Limited, General Card Services Limited. Report on Credit Conditions of Financial Institutions in the First Quarter of 2010 and Outlook for the Second Quarter of 2010
6 Details of contributing factors to demand for loans and credit standards
Figure 7: Factors affecting credit standards (corporate loans)
Figure 8: Conditions and Terms (corporate loans)
100
100 50
0
0
-50
-50
2009
2010
2008
2009
2010
2008
2009
2010
Margin for normal loans
Margin for riskier loans
2009
2010
2008
2009
2010
2008
2009
2010
2008
2009 2010
Source: BOT's Survey on Credit Conditions, April 2010.
Figure 9: Expected concerns on credit quality (corporate loans)
Figure 10: Factors affecting housing loan demand
100
100 SMEs
Overall
50
50
0
0
-50
-50
2008
2009
2010
2008
2009
2010
2008
2009
-100
2010
2008
Source: BOT's Survey on Credit Conditions, April 2010.
Other banks
Factors affecting housing loan demand Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
Expected concerns on credit quality (corporate loans)
Consumer confidence
Housing market prospect
2009
Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
Large
2010
2008
2009
2010
2008
2009
2010
Source: BOT's Survey on Credit Conditions, April 2010.
Figure 11: Factors affecting credit card loan demand
Figure 12: Factors affecting other loans demand
100
100 Interest rate
Loan conditions
Durable goods
50
50
0
0
-50
-50
2010
2008
2009
2010
Source: BOT's Survey on Credit Conditions, April 2010.
2008
2009
2010
2008
2009
2010
2008
2009
2010
Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
-100
Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
2009
Interest rate
Factors affecting other loans demand
Factors affecting credit card loan demand
2008
Consumer confidence
Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
Durable goods
-100
Margin for riskier loans
Conditions and Terms (corporate loans)
2008
Source: BOT's Survey on Credit Conditions, April 2010.
-100
Margin for normal loans
Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
-100
Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
Factor affecting credit standards (corporate loans)
2008
SME
Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
50
-100
Large
Industry-specific
Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
General economy
Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
Liquidity
2008
Source: BOT's Survey on Credit Conditions, April 2010.
Report on Credit Conditions of Financial Institutions in the First Quarter of 2010 and Outlook for the Second Quarter of 2010
2009
2010
7
Figure 13: Factors affecting credit standards (housing loans)
Figure 14: Factors affecting credit standards (credit card and other loans) 100
50
50
0
0
-50
-50 Factors affecting credit standards (housing loans)
2008
2009
2010
2008
2009
Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
-100 2010
2008
2009
2010
Source: BOT's Survey on Credit Conditions, April 2010.
-100
Credit card General economy
Others
Credit worthiness
General economy
Factors affecting credit standards (credit card and other loans)
2008
2009
2010
2008
2009
2010
2008
2009
2010
Source: BOT's Survey on Credit Conditions, April 2010.
Figure 15: Conditions and Terms (consumer loans) 100 50
Housing
Non-interest charges
LTV ratio
Credit card
Others
LTI ratio
LTI ratio
0 -50
2008
2009
2010
2008
2009
2010
2008
2009
Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
Conditions and Terms (consumer loans) Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
-100
2010
2008
Collateral
Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
Housing market prospect
Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
General economy
Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
Non-banks
Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
100
2009 2010
Source: BOT's Survey on Credit Conditions, April 2010.
Report on Credit Conditions of Financial Institutions in the First Quarter of 2010 and Outlook for the Second Quarter of 2010
2008
2009 2010