Commercial banks jockey for loans to SMEs
Some banks have cut their profit margins on loans to small and medium-sized enterprises (SMEs) in the face of strong competition, according to a financial source.
He said the landscape for loans to SMEs had changed significantly over the past few years since several banks began making aggressive loans to the sector. Competition for customer acquisition through debt-refinancing has changed significantly, though it seems to be normal practice for banks to expand their customer base. "For example, in the past when a bank wanted to acquire another bank's customer, they would offer additional credit lines, but now they need to acquire the customer's whole business," the source said. Over the past several years, almost all the commercial banks have gone into SME loans, which have potential growth. Bangkok Bank's executive vice president, Virasak Sutanthavibul, said the bank had been able to keep its customer base in SME loans despite the tougher competition. However, he admitted that the bank's margin in such business had reduced, without having a significant impact on the bank's income. In the current sceptical economic climate, the bank has elected to extend loans only to good customers. Thailand's largest bank will possibly revise its SME-loan growth target for this year by more than 10 per cent. In addition, he said, the bank has not concentrated on project-financing for the real-estate business for several years because the bank has tightened criteria for loan scrutiny. The bank's loan proportion for the real-estate industry remains at around 5 per cent of its total loan portfolio, and most loans are made to selected customers. The bank mainly considers location, products and the developer's track record. Customers who apply for loans from the bank must have experience in the business. "Customers who have no experience in real estate are not likely to receive a loan. In our experience, developers who don't have enough experience in the business are likely to fail," he said. Property-developers given project-finance loans from the country's largest bank include KE Land, the developer of the luxury Crystal Park residential project. Veerathai Santiprabhob, executive vice president of Siam Commercial Bank, said the bank still offered loans to SMEs in the real-estate sector. Also it has extended loans to those in the property market, including factories. Loans depend mainly on location and product.
Somruedi Banchongduang The Nation
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