Banks rush to auction off bad debts and NPLs due to high cost of management
The total of 400 billion baht is the highest in years
Financial institutions are rushing to sell more bad debts because of a surge in non-performing loans (NPLs), including repossession of cars and houses, a debt collection and negotiation services provider to financial institutions revealed.
Since the beginning of the year, more than 400 billion baht in bad debts have been offered for auction, the highest level in recent years, according to Suksan Yasasin, the CEO of Chayo Group.
The high volume of debt in the market has significantly discounted debt purchasing, particularly unsecured loans that now have a cost of around 6%, lower than the previous rate of over 10% of the total debt value.
Banks are offering discounts to offload these debts quickly, as the cost of managing and collecting them are high.
In the first half of the year, 300 billion baht in debt had already been auctioned off, with another 80 billion baht still up for auction until the end of the year. The results are expected to be known later this year.
Chayo Group continues to bid for debt, focusing on unsecured loans, Suksan said. The company had already purchased nearly 4 billion baht worth of debt to manage and aims to acquire and manage 10 billion baht in total, he added.
“Currently, there is a large supply but few buyers. The 400 billion baht in debt offered for auction this year is significantly higher compared to previous years, as banks are in a hurry to clear bad debts. We continue to bid, mainly focusing on unsecured loans, which require less capital and generate cash flow more quickly,” Suksan said.
As for the types of debts being auctioned, around 20-30% are auto loans, 50% are home loans, and the remainder consists of credit card debt and various personal loans.
Currently, Chayo Group is managing over 100 billion baht in debt, of which 75 billion baht are unsecured loans and 25 billion baht are secured loans.
Bundit Anantamongkol, CEO of Bangkok Commercial Asset Management, said that currently banks have put approximately 100 billion baht of bad debts up for auction with the company.
Some of the bad debts have not been released for sale because it has become more difficult to sell, and buyers are more selective given the flood of debt in the market. The company has already purchased nearly 70% of its target, and aims to acquire and manage 10 billion baht worth of bad debts.
"Many banks are reconsidering their sales strategies, leading to fewer assets being available in the second half of the year. Buyers are becoming more selective, and banks are hesitant to sell due to concerns over price reductions,” Budnit said. “Despite the abundance of assets, the company has only purchased a moderate amount, as we must manage both costs and debt collection efforts," he added.
