TMBThanachart Bank (ttb) expects to increase its loan interest rates by at least 0.5-0.6% next year, in line with the Bank of Thailand's monetary policy normalisation.
For 2023, the commercial banking industry is expected to face higher financial costs from the central bank's anticipated policy rate hikes.
The central bank raised the rate by 0.25 percentage points to 1% in September to help tame inflation, following an identical rate hike in August.
Commercial banks also face higher costs from the resumption of full contributions to the Financial Institution Development Fund, a rate of 0.46% of their deposits, from January next year.
The Bank of Thailand has allowed lower contribution levels, at a rate of 0.23%, under a measure relaxed because of the Covid-19 impact. The measure expires at the end of this year.
Commercial banks also pay a fee of 0.1% of deposits to the Deposit Protection Agency, according to the Deposit Protection Act.
Banks are expected to pass on these financial costs to borrowers as part of the market mechanism, said ttb chief executive Piti Tantakasem.
Mr Piti said banks would increase prime loan rates, including the minimum retail rate, minimum lending rate and minimum overdraft rate, as well as deposit rates at varying levels next year, depending on their financial cost.
However, lenders will still focus on taking care of vulnerable customers, he said.
Banks' recent hikes of both deposit and loan rates did not impact their earnings in the third quarter this year and should have a minimal effect in the fourth quarter, said Mr Piti.
As a result of the economic recovery, many borrowers who entered banks' debt relief programmes were able to successfully exit them.
He said the number of ttb customers who exited its debt relief programme was higher than expected, allowing the bank to project its non-performing loan ratio to fall to around 2.8% this year from an earlier target of 3.2%.
Mr Piti said some ttb customers rejoined the programme when inflation took off, although their debt repayment ability has improved.
Concern about a global recession could dampen consumer purchasing power and borrowers' debt payment ability next year, he said.
Mr Piti said ttb would monitor the situation and prepare for any challenges.
Next year the bank wants to continue its focus on asset quality and help borrowers in debt restructuring, he said.
This effort is expected to result in an improvement in the quality of its loan portfolio and a decline of provision costs, said Mr Piti.
