THAILAND

Bangkok Bank is considering increasing interest rates following the latest hike by the Bank of Thailand but will study market sentiment first, says president Chartsiri Sophonpanich.

The bank's liquidity remains good, while loan growth is improving in line with the economic recovery. BBL will likely increase both deposit and loan rates due to the policy rate move. However, a higher lending rate should not affect loan expansion if the increase is marginal.

The central bank's Monetary Policy Committee raised its one-day repurchase rate another 0.25 percentage points last Wednesday to 1.75%. However, commercial banks have kept interest rates unchanged.

Mr Chartsiri, who is also chairman of the Thai Bankers Association, said the banking sector would consider the market environment before making any rate decisions after the industry increased both deposit and lending rates following the last policy-rate adjustment in July, the first by the central bank in nearly two years.

BBL, the country's largest bank in terms of assets, raised its time deposit rate by 0.125 points and lifted its prime lending rates by 0.125 to 0.5 points last month. The bank's minimum lending rate is 6% per year, the minimum overdraft rate 6.25% and the minimum retail rate is 6.5%.

The bank last Friday signed a loan agreement with Thai Airways International (THAI) worth 12 billion baht with an eight-year maturity. The borrowing is part of THAI's business expansion plan for 2010 to 2014. Moreover, BBL adjusted the conditions for the company's existing loans worth 8 billion baht, giving THAI more operating flexibility.

THAI is borrowing 28 billion baht from five local banks. Siam Commercial Bank lent 8 billion baht, TMB Bank and Tisco Bank 3 billion each, and Thanachart Bank 2 billion. Demand for corporate loans is rising as the economy improves but BBL is keeping its existing target for loan growth this year at 4-5%, said Mr Chartsiri.