Chart, commercial banks : outstanding credit, volume and % of growth

I start to work on a new table from the Bank Of Thailand : Commercial Banks’ Deposits and Loans Classified by Provinces (FI_CB_011_S2).

(the old serie I used for these charts has been discontinued).

We will be able to follow deposits/credit in commercial banks, volume and % of growth, for the whole country, but also for Bangkok and upcountry (the split is interesting).

Let’s start with a first chart with “credit” (= loans + overdrafts + bills + other) for the whole country, from july 2006.

What’s going on ?

We can see a very violent surge since february ! In april, we had a growth of 18 % year on year, at 6 810 billions THB (6,8 trillions THB).

How to explain this ?

Looking back, I can’t see any seasonal pattern.

We can even say that it’s historic. Have a look from april 2005.

If we look at the details, the surge is located mainly in Bangkok (credit upcountry continues to grow, but at a declining pace).

This sign is dangerous. It’s like a credit bubble in Bangkok. To do what ? Build condos ? Industrial investments ? We don’t have a lot of factories inside the city.

Anyway, we have datas for GDP only for Q1. Therefore we can’t have a look at the details per sector (Q2 will be published end of august).

Other hypothesis ?

-1-Companies and people have hard time to pay back their loans, therefore the outstanding volume grows a lot

-2-Banks are on a “credit” binge and try to boost their results, despite the growing risks

-3-it’s part of the “stimulus campaign” from the government, in order to boost GDP : speed up the credit machine.

My view : a little bit of the three. But I prefer the hypothesis 1. From my experience on the ground, many companies… ask for longer credit term. They face strong pressure on their cashflow… because of higher costs.

Anyway, it smells bad.

I found new details about this story. Read here.

[the following days, I will continue the work on the BOT’s datas, and post charts about banks deposits]

2 Responses to “Chart, commercial banks : outstanding credit, volume and % of growth”

  1. 1 Gloomy Observer 17 June 2008 at 3:17 am

    That is concerning. Combine that with loose government fiscal policy and rates at 3.25% it’s no wonder inflation is still rising sharply. And if any country in the world still has the 1970’s style “cost plus” pricing mentality as well as the belief that wages MUST rise to match inflation, it’s Thailand. Things could get very messy ahead I fear.

  2. 2 thaicrisis 17 June 2008 at 4:08 am

    I agree 100 %, particularily on the “cost plus” and wages matching inflation… it is so true !

    Politicians, civil servants, labour unions… and even simple employee… they all believe in this magic : “inflation rises ? Just increase wages to offset the rising prices, and it will solve the problem”.
    Only business owners disagree. đŸ˜‰

    However, if the overall picture is inflationary, we can’t discount yet (we need more datas, particularily on GDP per sector for Q2) a solvency problem (people and businesses facing problem to pay back, leading to a growing outstanding amount of credit into the system).

    Which eventually is very deflationary.

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Thailand Crisis

Coup, Economic slowdown, Terror In the South... The situation is worsening in Thailand. Bumpy road like often before.

But this time, it's different.

The key to understand the present turmoil is the inevitable... succession of King Bhumibol.

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