"Under the current round of interest-rate hikes, Tisco's strategy is to slow down fixed-rate hire-purchase lending. It does not make good business sense to provide long-term fixed-interest loans, as market rates are still rising," said Pliu Mangkornkanok.

"Today, hire-purchase lending is profitable, but in the next five years, this will not likely be the case," said Pliu.

Vehicle hire-purchase loans are Tisco Bank's core business, making up as much as 70 per cent of its total lending portfolio. The remainder consists of commercial, housing and personal loans.

Tisco Bank is the second-largest hire-purchase loan provider, after Thanachart Bank.

Pliu said the bank might have to revise its total loan-growth target of 20 per cent for this year after recording a 0.4-per-cent growth slowdown in the first quarter. However, if the central bank continues to raise its benchmark policy rate, the bank will expand its hire-purchase lending.

In the first quarter, Tisco Bank raised both deposit and lending rates five times, in line with the market.

However, the bank's interest spread narrowed from 4.53 per cent in last year's first quarter to 4.06 per cent in last year's fourth quarter to 3.9 per cent in the first three months of this year.

Kiatnakin Bank, meanwhile, said vehicle hire-purchase would remain its core business, despite intensified competition.

"The bank isn't the market leader in terms of pricing, but we can keep our specialist niche in this market," said president Tawatchai Sudikitpisan.

He said the hire-purchase interest rate for new cars was expected to rise to 4 per cent by the end of the year, from about 3.4-3.5 per cent at present. Kiatnakin has targeted total loan growth for this year of 24 per cent.

Currently, the bank's vehicle hire-purchase lending accounts for around 50 per cent of its total loan portfolio.

Somruedi Banchongduang

The Nation