Thai Banks Have No Liquidity Concerns Unlike Silicon Valley Bank, Tisco Securities Says

The crisis among the US banking sector spread fears across the globe and investors are wondering whether this will happen to other countries’ banking systems as well.


Tisco Securities, a Thai securities-related services provider, does not believe that this type of crisis will happen to Thai banks, pointing out five major factors that support Thai banks to stay afloat.


1) The liquidity in the Thai banking system looks robust.

Loan-to-deposit ratio (LRD) including inter-bank loans is low at 106.6% and could stay this way for a while. Meanwhile, Liquidity Coverage Ratio (LCR) is also high at 192%, which is above the minimum requirement of 100%.


2) Cash-basis income is solid

As suggested by insignificant accrued interest receivables (AIR), which is the gap between AIR and cash-basis, a satisfactory net profit means current net cash flow for Thai banks is sufficient.

Meanwhile, high LCR for Thailand indicated that commercial banks have low liquidity risk.


3) Not yet attractive or easy to switch from deposits to other financial instruments

Yields of similar asset classes are not significantly different, hence, depositors tend to consider it not worth the effort to move deposits away for only slightly higher yields. The gap between non-interest-bearing deposits and the policy rate in Thailand is much narrower, unlike the US.


4) Low share of investments measured at amortized cost

Since Thai banks are in fine shape when it comes to liquidity, they should not need to pump up cash flow by selling investment securities. Tisco Securities also believes there should be limited unrealized market risk in investment securities measured at amortized cost. This portion is only 0.0% to 2.7% of total assets, except for SCB at 6.1%, which is still considerably low.

If risk rises, banks can set ECL for this investment, reducing accumulated market/credit risk in case of unexpected divestments.


5) High capital base

Thailand’s high capital base serves as a buffer to mitigate downside risk. Though Thai banks may not offer high growth, they should see limited adverse impacts during periods of crisis, as has been seen many times in the past (e.g. Global Financial Crisis in 2008 and Covid in 2020).