TBank plans to focus more on used-car loans
THANACHART Bank plans to resume its focus on used-car loans by embracing a new risk-based pricing system to control the quality of debt, as it believes that its outstanding auto loans will stabilise this year after shrinking over the past two years.
TBank’s outstanding auto loans used to be above Bt400 billion before declining to Bt399 billion in 2014 as repayments outstripped new lending. That situation continued last year because the economic slowdown affected purchasing power.
In 2015, TBank reported outstanding auto loans of Bt365.16 billion.
Somjate Moosirilert, chief executive officer and president of the bank, said that last quarter, TBank was able accelerate auto lending.
TBank aims for flat growth in outstanding loans this year.
He said the bank was making a new risk-based pricing system its key tool to tap new areas such as vehicles in the middle-class segment. Risk-based pricing will also tap the used-car market, a segment the bank had shied away from because of stock losses.
The new system, for example, will show which type of used vehicles could be high-risk and which regions in the country tend to have low rates of non-performing loans (NPLs).
Somjate said this would help the bank be selective in where and to whom it grants credit, and at what interest rates.
Used-car lending at present accounts for 30 per cent of TBank’s total, which could be increased through the new risk-based pricing system, he said.
The bank also hopes the system will lower the rate of non-performing auto loans this year to less than 2.3 per cent.
Another way to reduce bad debt, either auto loan or commercial loans, is to sell NPLs, and the bank will consider this option if it cannot collect debt within 18 months.
If the domestic economy recovers as hoped, overall outstanding instalment loans should reach Bt400 billion in two years, he said.
Anuwat Luengtaweekul, chief financial officer of TBank, said the bank’s capital was sufficient to cope with annual loan growth of 7-10 per cent, and if it can maintain this growth and return on equity of 10-12 per cent per year, it had no need to increase capital.
Capital adequacy
Its BIS (Bank for International Settlements) capital adequacy is 18 per cent, of which 12 per cent is Tier 1 capital. Its coverage ratio is 130 per cent and liquidity coverage ratio 110 per cent, higher than the 60 per cent required under Basel III guidelines.
TBank plans to increase commercial loans to small and medium-sized enterprises. Its commercial-loan portfolio at the end of 2015 was Bt74.23 billion, the smallest proportion of its overall loan portfolio of Bt713.46 billion.
Somjate said the business segments that had demand for lending were construction, foods and chemicals. However, the bank had a lot of work to do to expand its customer base and loan portfolio, especially by building relationships with businesses.
“We are setting up a unit that focuses on creating trust and relationships with customers,” he said.
“In the first phase, we will use humans to build relationships, and in the next phase, we will adapt the IT system to help out staff.”
