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. The questions in this survey include supply for credit, demand for credit and outlook for credit approval in the next quarter. 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: Ms.Warangkana Imudom
Team Executive, Economic Intelligence Team Tel: 0-2283-6131
Ms.Thanyalak Vibulsrisajja
Economist, Economic Intelligence Team
Tel: 0-2283-5646
Domestic Economic Department, Monetary Policy Group Address:
273 Samsen Road, Phra Nakhorn, Bangkok 10200
Fax:
0-2283-6848
BOT’s Website:
www.bot.or.th
Report on Credit Conditions of Financial Institutions in the Third Quarter of 2010 and Outlook for the Fourth Quarter of 2010* Overview of the Results In 2010 Q3, demand for all corporate loans increased from the previous quarter, following demand for fixed investment, working capital and inventory build-up. The demand significantly concentrated in various sectors namely banking, manufacturing, and wholesale and retail trade sectors, unchanged from the previous quarter. On the other hand, demand for housing loans decreased from the previous quarter as the stimulus measures ended in June 2010. While demand for credit card and other consumer loans increased from the previous quarter, following demand for necessity goods, improved consumer confidence, and somewhat eased and more attractive loan conditions in this quarter. Overall credit standards for corporate loans in 2010 Q3 were tightened marginally from the previous quarter. Respondent financial institutions were more cautious in granting loans due to liquidity conditions. But at the same time increased competition from other banks and issuance of debt securities discouraged them to impose more tightening of credit standard. Meanwhile, credit standards for all types of consumer loans also remained unchanged from the previous quarter. As for 2010 Q4, respondent financial institutions anticipated that demand for all corporate loans would increase, following economic recovery. Demand for housing loans was expected to remain stable. Demand for credit card and other consumer loans would expand, following economic recovery and improved consumer confidence. Meanwhile, respondent financial institutions expected credit standards for both corporate and consumer loans to remain unchanged. Nevertheless, respondent financial institutions would still be cautious in granting loans to certain businesses.
* Notes: 1) The Bank of Thailand conducts a quarterly credit conditions survey compiling senior loan officers’ opinion on bank lending practices. In the October 2010 survey, the Bank of Thailand received feedbacks from a total of 24 banks, comprising of 14 Thai commercial banks, 4 branches of foreign banks and 6 Specialised Financial Institutions (SFIs), covering about 88 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 Third Quarter of 2010 and Outlook for the Fourth Quarter of 2010
3 1. Corporate Loans (Loans or Credit Lines to Enterprises) In 2010 Q3, demand for all types of corporate loans increased from the previous quarter, following demand for fixed investment, working capital and inventory build-up. Similar to the previous quarter, the increased demand for corporate loans significantly concentrated in banking, wholesale and retail trade, and manufacturing sectors, particularly in food and beverages, chemical products, rubber and plastic products, and metal industries. This reflected an apparent recovery in both domestic and foreign demand.
Figure 1: Demand for Corporate Loans 100 Large
50
SMEs
Overall
0
Realized demand for Overall
Expected demand for SMEs
Expected demand for Overall
2009
2010
2009
Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Realized demand for SMEs
Expected demand for LEs
Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
-100
Realized demand for LEs
Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
-50
2010
2009
2010
Source: BOT's Survey on Credit Conditions, October 2010.
Nevertheless, large corporate was able to raise funds from alternative sources via a debt securities issuance. Those were mainly concentrated in financial intermediaries and real estate sectors. Moreover, it was noted that in this quarter large corporate relied on more foreign funds. While, SMEs still relied mostly on financial institutions and increased their demand for loans in the light of low interest rate. Figure 2: Factors affecting large corporate loan demand
Figure 3: Factors affecting SMEs loan demand 100
Inventory build-up
Fixed investment
50
50
0
0
-50
-50
2009
2009
2010
Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
Factors affecting large corporate loan demand
Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
-100
2010
Source: BOT's Survey on Credit Conditions, October 2010.
2009
2010
-100
Working capital
Inventory build-up
Factors affecting SMEs loan demand
2009
2009
2010
Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
Working capital
Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
Fixed investment
Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
100
2010
2009
Source: BOT's Survey on Credit Conditions, October 2010.
In 2010 Q3, credit standards for corporate loans were tightened marginally, in line with the expectation surveyed in the previous quarter. The respondent financial institutions expressed concerns about higher risk perception, both from general economic and specific-industry conditions. Besides, they began to be more cautious in granting loans regarding their liquidity conditions. However, credit standards could not be tightened much due to increased competition among individual financial institution and alternative financial sources from both bond and equity markets.
Report on Credit Conditions of Financial Institutions in the Third Quarter of 2010 and Outlook for the Fourth Quarter of 2010
2010
4 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
2009
2010
2009
Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
-100
Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
-50
2010
2009
2010
Source: BOT's Survey on Credit Conditions, October 2010.
As for conditions and terms for loan approval, respondent financial institutions continued to be cautious as reflected in a wider margin for high risk loans granted to both large corporate and SMEs. Besides, they were also more cautious in granting SME loans by increasing non-interest charges, collateral requirement and loan covenants. As for normal loans, on the other hand, respondent financial institutions somewhat eased the conditions and terms to both large corporate and SMEs as reflected in a narrow margin. Moreover, for large corporate loans non-interest charges was declined and credit line was increased. In 2010 Q4, respondent financial institutions anticipated that loan demand for all types of corporate loans would increase, following economic recovery. While credit standards for both large corporate and SMEs was expected to be almost unchanged. However, respondent financial institutions would be cautious in granting loans to certain businesses.
2. Consumer Loans (Loans to households) In 2010 Q3, demand for housing loans decreased from the previous quarter, in line with the expectation obtained from the previous survey. This was owing to the termination of the real estate stimulus measures in June 2010. Demand for credit card and other consumer loans increased from the previous quarter, following demand for necessity goods, improved consumer confidence and somewhat eased and attractive loan conditions.
Figure 5: Demand for Consumer Loans 100 Housing
Credit card
Others
50 0
2009
2010
Realized demand for other loans Expected demand for other loans
2009
Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Realized demand for credit card loans Expected demand for credit card loans
Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
-100
Realized demand for housing loans Expected demand for housing loans
Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
-50
2010
2009
2010
Source: BOT's Survey on Credit Conditions, October 2010.
Report on Credit Conditions of Financial Institutions in the Third Quarter of 2010 and Outlook for the Fourth Quarter of 2010
5 In 2010 Q3, credit standards for housing loans were marginally tightened compared to somewhat eased in the previous quarter, following concerns about housing market prospects, general economic conditions and credit worthiness. Respondent financial institutions increased margin for both normal and risky loans, increased non-interest charges and slightly reduced loan-toIncome ratio (LTI). Nevertheless, higher competitions from other banks, non-banks and SFIs caused respondent financial institutions some difficulties to further tighten their credit standards. Moreover, on the other hand, Loan-to-Value ratio (LTV) was increased compared to previous quarter. Credit standards for credit card and other consumer loans remained almost unchanged. Even though respondent financial institutions concerned more on credit worthiness and collateral, they maintained the same credit standards due to higher competition from other banks and SFIs in the light of a
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
2009
2010
2009
Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
-100
Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
-50
2010
2009
2010
Source: BOT's Survey on Credit Conditions, October 2010.
continuous economic recovery and improved consumer confidence. In 2010 Q4, respondent financial institutions perceived that demand for housing loans would remain stable, while demand for credit card and other consumer loans would increase following an economic recovery and a continuous improvement of consumer confidence. Credit standards for all types of consumer loans were expected to be almost unchanged from this quarter.
Economic Intelligence Team Domestic Economic Department Monetary Policy Group October 2010
Report on Credit Conditions of Financial Institutions in the Third Quarter of 2010 and Outlook for the Fourth 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 Large
Industry-specific
0
0
-50
-50
2009
2009
2010
Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
Factor affecting credit standards (corporate loans) Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
2010
2009
-100
2010
Source: BOT's Survey on Credit Conditions, October 2010.
Margin for riskier loans
Conditions and Terms (corporate loans)
2009
2009
2010
2010
2009
2010
2009
2010
Figure 10: Factors affecting housing loan demand
100 Household saving
Overall
50
50
0
0
-50
-50 Expected concerns on credit quality (corporate loans) Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
2009
2009
2010
Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
-100 2010
2009
2010
Other banks
Interest rate
Factors affecting housing loan demand
Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
SMEs
Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
Large
2009
2009
2010
Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
100
2010
2009
2010
Source: BOT's Survey on Credit Conditions, October 2010.
Source: BOT's Survey on Credit Conditions, October 2010.
Figure 11: Factors affecting credit card loan demand
Figure 12: Factors affecting other loans demand
100
100 General consumption
Consumer confidence
General consumption
50
50
0
0
-50
-50
Loan conditions
Factors affecting other loans demand
Factors affecting credit card loan demand
2010
Source: BOT's Survey on Credit Conditions, October 2010.
2009
2010
2009
2009
2010
Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2009
Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
-100
2009
2010
Consumer confidence
Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
Durable goods
-100
Margin for normal loans
Source: BOT's Survey on Credit Conditions, October 2010.
Figure 9: Expected concerns on credit quality (corporate loans)
-100
Margin for riskier loans
Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
-100
Margin for normal loans
Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
50
Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
50
SME
Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
Other banks
Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
Liquidity
2010
Source: BOT's Survey on Credit Conditions, October 2010.
Report on Credit Conditions of Financial Institutions in the Third Quarter of 2010 and Outlook for the Fourth 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
100 Other banks
50
Credit card
Credit worthiness
Housing market prospect
50
0
General economy
Others
Credit worthiness
General economy
Credit worthiness
0 -50
2010
2009
2010
2009
2009
2010
2010
2009
Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
2009
2010
Source: BOT's Survey on Credit Conditions, October 2010.
Factors affecting credit standards (credit card and other loans)
Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
2009
Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
-100 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
-100
Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
Factors affecting credit standards (housing loans)
Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
-50
2010
Source: BOT's Survey on Credit Conditions, October 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
2009
2010
2010
2009
Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
2009
Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
Conditions and Terms (consumer loans)
Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
-100
2010
2009
2010
Source: BOT's Survey on Credit Conditions, October 2010.
Report on Credit Conditions of Financial Institutions in the Third Quarter of 2010 and Outlook for the Fourth Quarter of 2010
2009
2010