Banking stocks continued to edge lower in the morning session of June 16, 2021 after the Prime Minister urged the Bank of Thailand to revise credit card, personal, and auto title loan regulations and interest rate ceilings in response to the country’s surging household debt.
As of 11:27 local time in Thailand, Bank of Ayudhya Public Company Limited (BAY) fell ฿0.75/share or 2.17% to ฿33.75/share with a trading value of 10 million baht.
The Siam Commercial Bank Public Company Limited (SCB) fell ฿1.00/share or 0.98% to ฿101.50/share with a trading value of 327 million baht.
Krung Thai Bank Public Company Limited (KTB) fell ฿0.10/share or 0.89% to ฿11.10/share with a trading value of 147 million baht.
Bangkok Bank Public Company Limited (BBL) fell ฿1.00/share or 0.83% to ฿120.00/share with a trading value of 373 million baht.
Asia Plus Securities (ASPS) stated that the Prime Minister and Deputy Prime Minister in economic affairs and the Bank of Thailand (BOT) discussed the household debt problem on June 14. The BOT will revise regulations and interest rate ceilings for credit card, personal, and auto title loans from the current ceilings of 6%, 25%, and 24%, respectively; no detail has been unveiled yet.
The bank with the largest share of credit card and personal loans is KTB (24% of total loans, mostly credit card and loans for state employees), followed by TISCO (auto title loans 15% of total loans) and BAY (10% of total loans). This revision will mainly affect credit card loans. Most banks set interest rates near the ceiling, but credit card interest is only collected from customers with the minimum payment, so this will have limited impact. Meanwhile, banks like TISCO have an auto title loan rate around 14%, lower than the minimum.
This revision has limited impact on bank plays. ASPS’s 2021-2022 forecast mainly revolves around credit cost and asset quality. Investors have to watch this issue as the BOT will set minimum interest rate ceilings for these loans in July. Continuously lowering loan rate ceilings will make banks’ returns not worth the risk and force them to tighten loan standards, which is not good for consumers.
ASPS reiterated NEUTRAL and favor BBL(TP: ฿154), KBANK (TP: ฿155), and TISCO (TP: ฿102). Bank plays may drop in the short term, but this is a good entry point to accumulate. COVID-19 vaccine distribution will lead to economic reopening, boosting debtors’ income and lowering asset quality risk.