Kasikorn Research Center (K-Research) has revised its total loan growth forecast for the banking sector in 2024, lowering it to 1.5% from a previous estimate of 2.5-3.5%.
This adjustment is mainly due to borrowers’ diminished capacity to secure credit, which correlates with slower economic growth.
In its updated report released on Tuesday, K-Research predicts that banks’ lending growth this year will be primarily driven by business loans, which are now anticipated to grow by 1.5%, up from the earlier forecast of 0.9-1.7%. Conversely, consumer loans are expected to experience minimal growth, rising only by 0.3%, down from a previous projection of 3-3.7%.
Auto hire-purchase loans are expected to decline by 5.5% this year, a notable reduction from the earlier forecast of 1-2% growth.
However, other consumer loan products, such as mortgages, credit cards, and personal loans, are projected to see growth rates of 1.2%, 2.2%, and 3%, respectively, according to the research firm.
Kanjana Chockpisansin, head of banking and financial sector research at K-Research, noted that Thai banks have recorded weak loan growth this year, reflecting the sluggish economy and high levels of household debt in the country.
The downgrade is largely due to a slowdown in retail loan growth, which constitutes 36.8% of the industry’s total outstanding loans. This decline is primarily driven by auto loans, which are set to shrink for the second consecutive year, she added.
Demand for auto loans during the first half of this year fell short of expectations, and this trend is anticipated to persist in the latter half. A price war in the automotive sector, particularly among Chinese battery electric vehicle (EV) brands, has led consumers to delay purchasing decisions as they wait for reduced EV prices.
“Weaker debt repayment abilities within the household sector are another critical factor contributing to the drop in consumer loan growth this year. Buyers of internal combustion engine vehicles and individuals considering properties priced between 3-5 million baht are facing higher loan rejection rates,” Ms. Kanjana explained.
Thailand’s escalating household debt is expected to further limit consumer access to loans, especially for major purchases like vehicles and homes. K-Research forecasts that the household debt-to-GDP ratio will slightly decrease to 90.7% this year from 91.4% last year, in light of anticipated GDP growth.
Ms. Kanjana stated that banks’ more stringent lending criteria, as a response to increased credit risk among both retail and business borrowers, will further restrict new loan approvals.
In the second quarter, total outstanding loans within the banking sector decreased by 0.2% year-on-year. Specifically, business loans fell by 1.3%, while consumer loans dropped by 0.03%. Meanwhile, government loans and business loans experienced higher repayment rates, according to K-Research.
