Rise in bad debts from credit cards
Bad debts from credit-card loans are increasing as the economic slow-down eats into the ability of bank customers to service their debts, says one banking executive.
The head of Bangkok Bank's Credit Card Division, Shoke na Ranong, who also represents the chairman of the Credit Card Club, said the Kingdom's credit-card market is showing signs of increasing non-performing loans (NPLs). Significantly, the signs of trouble began to appear in last December, but the failure rate remains "acceptable", he said. "Although bad credit-card debts are on the rise, it is not yet of concern to us. It isn't a key issue to be discussed at the next meeting of the Credit Card Club. Each credit-card provider will tackle the problem on its own." Shoke said Bangkok Bank's NPLs from plastic-card loans rose about 0.25 per cent in the first quarter and that this was still an acceptable rate. The bank has relaxed debt-repayment conditions for some customers, in order to reduce their financial burden. Bangkok Bank maintains an annual interest rate of 18 per cent on credit-card loans, despite other card issuers having increased their maximum rate to 20 per cent, the ceiling allowed by the Bank of Thailand, he said. The bank does not want to pass on higher costs to customers. Its funding costs are still under control, and the bank believes it must consider the ability of its customers to service their debts. Bangkok Bank predicts credit-card spending will grow 15-16 per cent this year, lower than last year's 20 per cent. However plastic-card spending by Bangkok Bank customers grew 17 per cent year on year in the first quarter, driven by the bank's marketing and promotion campaigns. Without these, spending would have grown only 12-15 per cent in the first quarter, Shoke said. He said it was hoped that after this year's general election, Thailand's economic environment would improve and domestic consumption build up. Separately, executive vice president Deja Tulananda said the Kingdom's gross domestic product would possibly grow 4 per cent this year but that the core factor that drives economic growth was people's confidence. Interest rates alone will not lift the economy. President Chartsiri Sophonpanich said lower interest rates would relieve the burden on the bank's borrowers and control NPLs. In the first quarter, NPLs in the country's banking system stood at 4.19 per cent of total loans, up from 4.12 per cent at the end of last year.
Somruedi Banchongduang The Nation
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