Chart, banks : deposits minus credits… something is happening

I give you a new chart. I call it the X Chart, because, well… it’s the kind that leads to several interpretations. πŸ˜‰

But, the current crisis shreds some weird light on it.

The BOT publishes per month the total amounts (outstanding) of deposits and credits at commercial banks, per area.

I use those data to follow the evolution of credits and deposits (look charts here).

Let’s have fun and look at the evolution of the total deposits minus the total credits, per month… For the whole country, and then between Bangkok and upcountry.


The time scale is rather long (since january 2005), enough to detect trends.

We can see clearly that something happened : since june 2008, the balance is in the red.

With the split by area, we see that upcountry is very reasonable… deposits are always superior to the total amount of credit… On the other hand, Bangkok is “sucking” the credit breast.

We can make several comments :
-we don’t know what is the cause : is the balance going down because people and businesses decrease their deposits ? Or because they increase their credits ?

-what about the people ? I wrote “reasonable” for the folks upcountry. But is it a fact ? Here too, we can see the bottle half empty of half full. They might be reluctant to take loans… Or they always save a lot (that would be the reasonable scenario). Or maybe they are willing to take more debts… but the banks are much more “cautious” (compared to Bangkok for instance) and deny many loans applications, etc.

-and is it good, or bad ? People and businesses in Bangkok might be investing more (lower deposits, higher credits). That would be good. Or maybe they are a just fanatic shoppers… and just spend money buying stuff cash and with credit (good for consumption, but not very reasonable), etc.

-and what about the date. Why this “event” took place in june 2008 ?

We need another chart to see through.


Voila. We have our rational explanation : the long term trend (deposits always superior to credits) went in reverse mode in june 2008.

But still, it doesn’t help us to understand what are the causes. The point is : both deposits and credits continue to increase, but in an inversed order.

It’s rather strange.

I guess it’s difficult to gives an interpretation because like for many other issues, Thailand is not one. It’s difficult to compare behaviors and other economic data between Bangkok and the poor areas up country for instance… Those huge differences lead to comparisons that look weird.

In any case, we can say that the situation is less healthy for the banks than before. πŸ˜‰

Last point to help you to put things in perspectives :

-individuals have much higher deposits than businesses (4 460 billions versus 1 410 billions)
-and for credits, it’s the opposite (3 846 billions credits for businesses versus 2 170 billions for individuals)

My interpretation : this chart is a reflection of the crisis.

-individuals are scared, because of the crisis, they are saving much more (6% y-o-y in november, 8 % in december… before it was +1 or 2%, the sudden change is obvious)

-businesses are scared and affected by the crisis… they have cash flow problems… they reduce their deposits… and increase credits.

That’s not a good omen for the whole economy…

(Source Bank Of Thailand, table FI_CB_011_S2)

6 Responses to “Chart, banks : deposits minus credits… something is happening”

  1. 1 Bedwyr 26 March 2009 at 1:35 am

    Perhaps it is just a heightened awareness, but on my recent trip to BKK, one of the things that was very obvious was the number of people using plastic for their food and other daily shopping.

    It seemed to be very much more prevalent than I remember seeing last year at this time.


  2. 2 brazoo 27 March 2009 at 5:47 pm

    very interesting, but I somehow disagree with your interpretation.

    If we take a look at the 2nd graph, at the begining we can see a correlation between credits and deposits. So far so good. Normal if you ask me.

    Starting 2008 we see a big increase in credits while no changes on deposits. Back then noone was talking about crisis. So people were probably investing. Question is, were did that money come from? Either Thailand increased the amount of money circulating … but then … where did it go to? It must have been circulationg without being deposited. I would call that a booming economy. Lots of additional money circulating

    Now there is probably a second effect starting lets say back in Oct08 … lots of investments in the past and no payback due to the crisis. People need more money and credits seem to still be handed out. I would have expected less credits, but no.

    And that is the problem from my point of view. If the export crisis goes on, the real crisis for Thailand is still to come. Credits increased around 1.3 b THB fom Jan08 to Jan09 (around 20%). If those new investments have no payback and the economy is not able to pay back those credits and interest and no new credits are being handed out (like in the rest of the world) … then we can say “hello crisis” … and this time the real financial crisis.

    But I admit … I am not a guru of macroeconomics … just my thoughts πŸ˜‰

  3. 3 ThaiCrisis 27 March 2009 at 6:29 pm

    You have to put things into context, the political context.

    Quick reminder :
    -the (ex)PPP wins the elections in december 2007. End of Junta. Samak becomes PM. Thaksin is of course behind.

    -quickly, they apply the good old recipes : boosting expenses. It was necessary to boost the political base… And to start filling the first holes of the crisis.

    -the circus about “stimulus plans” didn’t start with Abhisit. Samak was on the front line. Budget deficit, spendings, subsidies everywhere (beginning of 2008 we saw inflation increasing, the oil shock, rice and food crisis during spring 2008 etc.).
    Look here :

    -this is why you can’t say that no one was speaking about a crisis beginning 2008 (I certainly did πŸ˜‰ )

    -second mistake : investments. They never increased. Look at the GPD reports on Q1, Q2, Q3, Q4… investments are… dead like a dead cow.

    -so what we saw was instead… spending, consumption. The nefarious (but delicious sometimes) smells of easy money, spent. And credits… to hide cash flow problems (businesses were confronted to a huge increase of costs, look my chart about PPI. But it was difficult (and sometimes forbidden by the government) to increase their own prices).
    Like you wrote it was… (a very small) boom. But a wicked one. A virtual one. Artificial.

    Last point : of course there is a correlation (normally) between deposits and credits. What we are seeing is a change of the pace, with credits increasing faster than deposits (or as I wrote, deposits growing slower than credits)… it’s the bottle half full or half empty. It’s not normal.

  4. 4 brazoo 28 March 2009 at 1:29 am

    Ok … I guess the picture is getting clearer πŸ˜‰

    Then I would have to look at the credit increase this way (just the beginning):

    – credits were not used for investment
    – there were not used for deficit spending (goverment), since we are talking about commercial banks
    – they had no impact on the deposits
    – lots of it had been used for financing the PPI-impact
    – maybe some part increased the money circulating (kind of private deficit spending
    Therefore we should see the counterpart of those credits in the lack of company earnings, therefore no increase of the deposits. Would that make sense?

    – if commercial banks are giving away more credits then they have deposits, I guess they have to refinance themself from the BOT. That would mean Thailand is increasing the circulating money. But where does it go to? Is it inflation or is it flowing out of the country?
    ItΒ΄s not being invested, its not being spend in Thailand (otherwise I would expect a GDP increase and/or a deposit increase). Gone?

    The more I look at it the stranger it gets. Something dramatic must have happened between Jan08 and May08. After that it looks “normal” even though not healthy. Credits seem to go in line with the deposits.

    I hope I am not bothering you with my comments

  5. 5 ThaiCrisis 28 March 2009 at 7:07 am

    Another chart will help you.

    Credit per type of debtor

    Government (unfortunatly) do borrow from commercial banks. πŸ˜‰
    And public spendings did increase a lot with Samak begininning 2008 (look GDP report)

    -company earnings : it is confirmed.

    -credits to deposits ratios : I’m going to create a chart to see through. You could be right with the BOT increasing the circulating money. And yes we did have inflation. +9,2 % in july yoy (and understated, because of subsidies, prices controls etc.)
    Plus don’t forget that (part of exchange rate policy) the BOT until march 2008 was buying USD like crazy… and they were mopping liquidities with bonds… But maybe (certainly) not all the amount… USD was falling, it was necessary to save the Private Exports. Hence the kolossal increase of foreign currency reserve.
    Chart :

    By the way this policy certainly reduced the number of bullets they had to manage liquidities into the system.

    -GDP : consumption was up beginning 2008. Look the chart of GDP’s components :

    -last but not least : we forgot to speak about… interest rates πŸ˜‰
    It’s ALSO a factor.
    But they didn’t play a big role I think : interest rates were flat first half 2008.

    Overall, I really think the equation is too complex. This is why I wrote about the “X chart” and the “bottle half full or half empty”.

    There are too many factors : some vague (public sentiment, banks behavior, business owners, authorities etc.)… plus factors (CPI, PPI, exchange rate, liquidities, interest rates, fiscal policy, GDP) some of them already the result of another equation.

    Plus there is the dynamic of time that changes causality.

    For instance :
    Classic model
    -from a bank point of view : low interest rates = low deposit rates. Credits increase. Deposits can behave in both way. People are euphoric they consume, invest and there is no incentive to leave cash at the banks, so deposits are going down.

    But what if the mood of the public changes suddenly ? Then the rule changes. Fears will cause public to increase their savings for instance. And reduce their credits. But still interest rates are low. And they even go lower….

    Then, another period of time : economic crisis. People and businesses are suffering. Then the outcome of the rule changes AGAIN : people who lose their job would tap their… savings, their deposits.


    This is really I think the big problem we had : we were just applying models from (stupid) text book : the famous Greenspan Put for instance.
    They were so proud about it…

    Your growth is a little bit shaggy ? Cut interests rates, and voila ! 5 months later you get a very nice recovery, followed by a strong growth. You can be reelected. “Mission accomplished”. Perfect world… but too easy.

    Politicians, bankers, companies and people were following rules. Magnified by this very human bias : the desire for stability, to freeze things in time. For instance : what was true before HAS to be true after, etc. it’s a classic.

    And then… the black swan. The factors of the equation are still the same (you, me, us, the banks, the businesses, the gvt)… but paf ! The outcome changes. πŸ˜‰

    Welcome to the most interesting and difficult object of study : economy.

    A powerful cocktail of stupid numbers… and smart (and versatile and highly complex) living organisms : us. The people. πŸ˜‰

  6. 6 sammy 5 May 2009 at 8:49 pm

    anyone notice the downgrade of UOB and DBS Thailand banks last month? I asked a friend of mine at citibank what was the motivation by the ratings agency and she said that the ratings agencies are concerned that Thailand will impose currency controls making it impossible for these banks’ parent companies in Singapore to send in cash to shore up their Thailand operations. If the ratings agencies are worrying about his then I am starting to get worried.

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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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